Is singapore setting itself up for a fall?

Is singapore setting itself up for a fall?

  • Singapore’s position as a globally-competitive economic hub cannot be taken for granted. Further policy calibration is needed to tackle cyclical and structural challenges.
  • The external sector outlook has been worsening in recent months, which will likely spill over into domestic demand as the post-pandemic boosts recede.
  • The city-state has had a good few years due to sound pandemic management, adept investment promotion, and setbacks experienced by rival hubs such as Hong Kong.
  • However, concerns over the costs of doing business, particularly in labour and rental costs, are early warning signs that firms may look elsewhere if these issues are not fixed.
  • Structural shifts in policy are required, including enhancing regional integration with neighbours, rethinking the education system, and pro-competition policy reforms.

Asian urbanization warrants plugging infrastructure gaps

  • Emerging Asia is on the cusp of a rapid expansion in its urban population. This brings with it exciting opportunities for employment and business activity.
  • However, investments into infrastructure need to be made now to ensure that the needs of the expanded urban population can be met to avoid downsides such as congestion.
  • The medium-term financing needs for infrastructure are significant, with the transport, energy, and telecommunications segments facing their own set of challenges.
  • Both public and private sector finance need to work in tandem to meet this challenge.

Regional updates

  • Korea’s central bank kept its policy rate unchanged while pushing back against expectations of rate cuts in the year. Still-high inflation means that cuts are unlikely.
  • Taiwan experienced continued headwinds in exports due to the technology cycle downturn. Inflation eases, weakening the case for further rate hikes.
  • India’s industrial production remained healthy alongside other indicators.
  • China will experience cyclical headwinds despite healthy figures in loan and export growth. Overt policy stimulus is unlikely, but measures to restore confidence may help.

Read more: CAA-Weekly-17-Apr-2023.pdf