Tuesday, 11 July 2017

How will global worries impact Singapore?

By Chia Yan Min, Economics Correspondent, The Straits Times, 10 Jul 2017

Singapore has been buffeted by a string of unexpected global developments in recent months - raising questions about prospects for the Republic's small, open economy.

The outlook has stabilised since the start of the year but a host of uncertainties are still looming on the horizon.

The Straits Times looks at some recent key events with potentially significant repercussions for the global outlook and examines their impact on the Singapore economy.


Britain's shock vote on June 23 last year to leave the European Union (EU) has so far generated more uncertainty than actual disruption to the global economic and political environments.

Britain has started the process of negotiating its exit from the EU, but since there is no precedent, it is unclear how the Brexit process will work and what the outcome will be.

The uncertainty deepened when Prime Minister Theresa May weakened her hand after a much-closer-than-expected snap election on June 8 - that she had intended to strengthen her negotiating position with the EU.

Britain is scheduled to leave in March 2019. An extension can be granted if all EU members agree.

Uncertainties over Brexit have played out largely in the currency markets.

The pound, which had already taken a battering in the wake of the Brexit vote, fell sharply against major currencies last month after the British election delivered no clear winner.

Currency fluctuations aside, economists largely believe Singapore and the rest of ASEAN will remain relatively insulated from the effects of Brexit, as most regional economies do not have significant trade exposure to Britain.

Britain is only No. 22 on the list of Singapore's trading partners. Non-oil domestic exports to Britain account for less than 1 per cent of the Republic's total shipments, while imports from Britain make up about 2 per cent of Singapore's total imports.

But Singapore companies with a presence in Britain, or those which use it as a gateway to the vast European single market, could be hurt if Brexit terms are unfavourable.

There are also wider concerns about the EU's long-term future and whether more European countries might decide to follow in Britain's footsteps and leave the grouping.

This would be detrimental to the global economy, including Singapore's. The EU is the Republic's second-largest trading partner after China.


The Brexit referendum outcome seemed to mark a shift in global attitudes in favour of populism and protectionism - a shift driven home by Mr Trump's rhetoric on the campaign trail and his eventual election as the 45th president of the United States.

The President-elect and businessman outlined an isolationist agenda during his campaign, casting doubt over the future of US foreign policy and trade relations.

For instance, he claimed that countries such as Singapore, China, India and Mexico were stealing jobs from Americans and vowed to stop the "job-killing" Trans-Pacific Partnership (TPP).

He put that promise into practice in January, signing an executive order ending US participation in the TPP, a free trade pact signed by 12 countries - including Singapore - that together account for 40 per cent of world trade.

The remaining signatories have agreed to move the trade deal forward without the US.

The 11 countries remaining in the trade agreement are : Singapore, Japan, Australia, Canada, Brunei, Chile, Mexico, New Zealand, Malaysia, Peru and Vietnam.

Singapore already has a bilateral free trade pact with the US - as well as with all of the other TPP countries, except Canada and Mexico - so Mr Trump's decision is unlikely to have significant impact on actual Singapore-US trade volumes.

The US is Singapore's third- largest trading partner, with total bilateral trade of over $75 billion in 2015.

The TPP is seriously weakened without the huge US market, which accounted for 60 per cent of the economies covered by the pact and was a major reason some countries decided to join the deal.

Still, it remains to be seen how the remaining TPP countries will decide to move the deal forward.


The scourge of terrorism has risen in worrying intensity and proximity to Singapore, with the threat now at its highest level in recent years.

Terror attacks have occurred all over the world - in the Philippines, Kuala Lumpur, Jakarta, Melbourne, Sydney, Paris and London.

Terror incidents jumped threefold from about 5,000 in 2011 to nearly 17,000 in 2014. In contrast, the figure in 2000 was around 1,800.

Singapore has been identified by supporters of the Islamic State in Iraq and Syria (ISIS) terror group as part of its "East Asia wilayah" or state.

The others are Malaysia, Indonesia, the Philippines, southern Thailand, Myanmar and Japan.

The rise of ISIS-linked terrorists fighting in the Philippine city of Marawi is a worrying sign of the threat getting closer to home, Defence Minister Ng Eng Hen has said.

Self-radicalised individuals also pose a growing threat. Last month, two Singaporean auxiliary police officers were arrested for terrorism-related offences under the Internal Security Act.

Second Minister for Home Affairs Desmond Lee has also revealed in Parliament that two maids who were radicalised have been detected here in recent months, bringing the total number of such cases since 2015 to nine.

The Singapore authorities have been working on the basis of "when, rather than if" a terror attack will occur.

This means trying to make sure Singapore is as well prepared as possible so the economy, as well as society as a whole, can remain resilient in the aftermath.

The Singapore Perspective

More stable growth this year but outlook remains uncertain
By Chia Yan Min, Economics Correspondent, The Straits Times, 10 Jul 2017

Singapore's economy took a turn for the better in the first half of this year, thanks largely to a resurgent manufacturing sector and stronger global demand.

However, the outlook for the rest of the year remains hazy, especially as sectors which rely mainly on local demand have yet to feel much of a lift.

The Ministry of Trade and Industry expects this year's economic growth to come in above 2 per cent. That sits at the higher end of its 1 per cent to 3 per cent forecast for the full year and surpasses last year's modest 2 per cent pace.

Trade-related segments, including electronics manufacturing and wholesale trade, boomed in the first half of the year on the back of a surge in global demand for semiconductors and related equipment.

Manufacturing, which makes up a fifth of the economy, expanded for the 10th straight month in May on the back of a global export rebound that has lifted demand for Singapore's shipments, particularly in electronics.

But there are signs that this pickup may be tapering off - May's expansion was not only slower than in April, but also fell short of economist forecasts.

In addition, this stronger growth has not been broad-based - sectors which rely largely on local demand, such as construction and food and beverage, remain mired in a slowdown.

It remains to be seen whether manufacturing sector growth can be sustained and eventually spill over to the rest of the economy.

The labour market is also still not out of the woods, though it, too, is showing signs of stabilising. Data from the Ministry of Manpower showed the number of workers laid off in the first quarter fell to the lowest level in over a year.

This is the ninth of 12 primers on current affairs issues that are part of the outreach programme for The Straits Times-Ministry of Education National Current Affairs Quiz

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