During an interview with Bloomberg TV earlier today (20 May), Minister for Trade and Industry Chan Chun Sing remarked that the economy faces several downside risks, despite recent data showing a surprise improvement in exports.
“We are quietly encouraged by some of the positive numbers coming in for the first quarter despite the headwinds. But we are not complacent as we are aware that in the coming months, the downside risks are still many,” Mr Chan told the Bloomberg reporter.
Singapore’s gross domestic product plunged 2.2 per cent in the first quarter from a year earlier, the worst performance since the global financial crisis.
The Minister took to his Facebook earlier to share what was discussed during the interview. He noted that Singapore will need to monitor and manage the economy situation carefully. With that, he outlined four sets of downside risks that may impact the economy.
The first risk is the recurring infection waves amongst many countries, including the countries that have the outbreak under control. He warned that the risk of subsequent waves of infection is very high.
The second risk centered on unemployment, as well as the business closure curve.
“Beyond the urgent need to suppress the epidemic curve, the country must flatten the unemployment and business closure curves,” Mr Chan remarked.
The third risk is policy-induced risks. According to the Minister, some countries may take on more protectionist measures amid the pandemic, when it should focus on a greater inter-dependence for better resilience.
Lastly, he stated that many countries may resort to quantitative easing to rebound their economy.
Mr Chan pointed out that many countries will require fiscal resources to support businesses and workers during this period, but not all countries are able to do so which could lead them resorting to quantitative easing or competitive devaluation to rebound their economy.
“If so, there will be severe global knock-on effects,” he asserted.
In light of the current tension between the United States and China, the reporter asked whether Singapore will be divided between the two allies. Mr Chan responded, “I don’t think so.”
He reiterated that Singapore plays the role of a “free and open economy”, adding that the country is open for investments from all parties and countries – be it China, Europe, India, and the United States.
“One of our roles is to integrate and value-add to different parts of the supply chains. Thus, even if supply chains were to shift, there will always be opportunities for us. Our role may be even more important in a world divided by geopolitics and protectionist policies,” Mr Chan explained.
In terms of the economic impact after lifting the circuit breaker measures, he said that more than three-fourths of the economy will resume operations, as well as the cross-border business activities. With the country’s structure of economy, he noted that it allows many of the employees to be able to work from home.
Nevertheless, he stated that there are challenges and opportunities in the short- to medium-term.
“Short-term, we have to lower unemployment in some sectors. We need to shift our economy to a new “equilibrium” in the medium-term, where some sectors such as those with brick-and-mortar outlets may need to downsize, whilst those in sectors like e-commerce will upsize. At the same time, we have to help our people transit from sectors,” Mr Chan elaborated.
The Minister also hinted that the economy recovery also depends on the availability of affordable, rapid test kits and the roll-out of the COVID-19 vaccine.
“If either one of these or both come about in the next few months, then I think there’s a much better chance of us recovering faster,” he said in the interview.