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Singapore—At the Singapore International Energy Week conference on Tuesday, October 29, Chan Chun Sing, the country’s Trade and Industry Minister, told CNBC that the country will not be entering a recession “at this point in time,” and that Singapore remains “quietly confident.”
Mr Chan underlined this point, in spite of current trade tensions and the risk of increasing global fragmentation.
Earlier this month, data released by the Government showed a growth of 0.6 percent in the third quarter. Viewed on a year-on-year basis, the economy grew by 0.1% for this quarter, which was below the expectation that analysts had set.
In the second quarter of this year, Singapore’s economy contracted by 2.7 percent, one of the worst quarters the country has seen in years.
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But growth in the third quarter, however small, meant that the country narrowly missed a technical recession, which is defined as experiencing a contraction for two successive quarters.
However, as the CNBC report points out, the economy of Singapore, because of its high reliance on trade, is commonly perceived as a bellwether for worldwide economic growth. Singapore’s economy is extremely sensitive to changes in worldwide trade trends and business cycles.
The Trade and Industry Minister was asked by CNBC whether Singapore can avoid a recession, to which he replied,
“At this point in time, I don’t think we are looking at a recession.
But we are of course cognizant of the larger forces moving in the world. But yet at the same time, we are quietly confident.”
Mr Chan added that the biggest issue the country would be facing in the next decade and a half lies in whether the world moves in a direction that is more integrated, or if it does so in a “more fragmented global trading and production system.
If the world bifurcates or fragments … that would bring in a very different growth trajectory for the entire world.”
However, the country can “play to our strengths” in the midst of ongoing trade disruptions. Singapore has had long-term economic stability, intellectual property protection, as well as a pro-business environment.
“I think those are the factors that we offer investors for their long term investment,” the Trade and Industry Minister said.
Singapore has been especially affected by trade tensions between the United States and China, the two biggest economies in the world, who have added tariffs on each other’s goods for more than a year, affecting many countries’ supply chains and manufacturing sectors.
Last week, the head of the country’s central bank, the Monetary Authority of Singapore (MAS), Managing Director Ravi Menon, is saying that it may be a few more quarters before the country experiences economic recovery.
Bloomberg reports Mr Menon as saying in an interview that “the current cycle should be bottoming out toward the end of the year and into next year,” assuming that the downturn remains contained in the trade and manufacturing industries.
Prime Minister Lee Hsien Loong has said that the country would be “lucky” to show positive economic growth for the year. In last week’s Forbes Global CEO Conference, PM Lee said,
“This year we’ll be well under 1%. If we’re lucky we should be above zero, but the momentum has substantially diminished. And a lot of it is lack of confidence — uncertainty.”
For this year, MAS expects growth of between 0 to 1 percent, followed by a modest improvement next year. Mr Menon told Bloomberg, “It’s not going to be a robust recovery.”
And while the negative output gap, which is the estimated difference between the economy’s actual and potential performance, is not anticipated to get bigger, there are still risks that it could, the MAS head added.
He said that while the downturn is mainly seen in in trade and manufacturing industries, it “doesn’t mean it cannot spill over into other parts of the economy — it could very well do so. That is a risk that we’re seriously taking into account. But as of now, there are no signs of that.”/ TISG
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