Singapore’s economy could see some slowdown as the world economic outlook becomes uncertain. And a global recession is more likely than not as the US and European economies are at “stall” speed.
That’s according to Finance Minister Tharman Shanmugaratnam, who was speaking at the third World Bank – Singapore Infrastructure Finance Summit Tuesday.
It has been said that when the US sneezes, the world catches a cold.
And now, with Europe and Japan being in dire straits as well, Asia may no longer be immune to the global slowdown.
Although Singapore will be vulnerable, Mr Tharman said the government “will know how to respond” in the event of a major dip in the economy.
“Some slowdown is now very likely. What we have to do is to focus more on our medium and longer term challenges – we can deal with the short term, quite frankly, we’ve got the fiscal space to deal with it,” said Mr Tharman.
Last month, Singapore revised down its full-year GDP growth forecast to 5 to 6 per cent, from 5 to 7 per cent earlier.
Besides a slowing global demand, Singapore also has to face with capital inflows such as funds from the West seeking higher returns in Asia.
This has driven up asset prices in Singapore and put greater pressure on the local economy.
A recent report from the Monetary Authority of Singapore showed that gross capital flows grew 18 per cent to S$46 billion in the second quarter of this year.
“Capital will be in search of yield, capital will flow to the emerging world and we do have a challenge of ensuring that it’s put to the most productive use, rather than into over-inflating asset markets and causing monetary instability,” said Mr Tharman.
These capital flows can be directed to more productive uses, such as infrastructure funds and public-private partnerships, according to a panel at the summit.
Tan Sri Dato’ Azman, managing director of Khazanah Nasional, said that this could be an attractive option for yield-hungry investors.
And Mr Tharman added that it is also important to raise productivity across industry sectors and grow median incomes.
Source: CNA.
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