Singapore assesses forecast for 2019 against the risks of trade war, government and economy

Mon Nov 5, 2018 – 07:08

[SINGAPORE] Singapore may need to revise its economic growth forecast for next year, as a trade dispute between the two largest economies in the world increases uncertainty and dampens business investment, said his finance minister .

"In the short term, the impact is not yet fully felt", Singapore has maintained its growth forecast for this year at 2.5% and 3.5%, said Heng Swee Keat in an interview granted to Haslinda Amin of Bloomberg Television. "But any trade tensions that delay globalization will affect everyone, including the countries directly involved, but also the collateral damage in all economies."

Heng made the remarks at the Bloomberg New Economy Forum this week in Singapore, where policymakers and business leaders will gather to debate the changing dynamics of the world as economic influence moves from West in East.

In Southeast Asia, countries are facing a powerful storm of economic challenges: a tariff battle with significant stakes between the US and China, a tightening of global monetary policy, a strengthening dollar and risk capital outflows.

Singapore, a hub of international trade benefiting from trade and goods movement between manufacturing centers in the region, the United States and Europe, has already seen exports slow down this year.

UNCERTAIN PROSPECTS

Asked that Singapore may have to re-evaluate its still-announced forecast for 2019, Heng said "Indeed," pointing to the International Monetary Fund's deterioration of its global outlook. Economic agencies and the central bank have been in close contact with business and are looking into whether projections should be "modified or revised," he said.

"We are beginning to see the effects in terms of increased uncertainty and reduced business investment," he said. While the 2018 growth is expected to be in the upper half of the projection, "for next year, it depends on how the situation evolves in the coming months, as many of these investment decisions to be made will affected. " . "

Beyond 2019, a protracted trade war would severely disrupt the global supply chain, raising long-term growth challenges for countries as the "global production frontier" is reduced, Heng said.

COMMERCIAL RISKS

The 57-year-old minister is one of the men considered one of the main candidates for the post of Singapore's next prime minister. He has held the position of Minister of Finance since 2015 and previously held the post of Minister of Education and Chief Executive Officer of the Monetary Authority of Singapore.

Heng said: "The structural drivers of growth in Asia are strong – look at the population, the growing middle class, the adoption of multilateralism and free trade, and the growing efforts in of technology and innovation. "

"What we are hoping for is positioning Singapore as a global Asian node of technology, innovation and enterprise," which gives it a competitive advantage through its connectivity with the world. global economy and Asia, its adherence to international standards and the rule of law. its opening. "Our protection of intellectual property and the trust that people have in Singapore as a business center are so important."

SUPPLY CHAINS

"This business dispute is causing concern among businesses, all of whom are seeking solutions to strengthen the resilience of their supply chain.In the short term, some of these immediate changes" and "the natural evolution of the supply chain is now facing a severe shock because of this change ".

"Will it be an advantage for the global economy in the long run? Not if the trade dispute remains protracted, as it means you are moving away from what should be the frontier of production for the economy? "and the specialization that" should take place and evolve as economic conditions change can be diverted in a certain way ".

"Countries in the region will need to make the most of this degraded situation" by accelerating the development of their infrastructure, connectivity and other areas. "Otherwise, the supply chain becomes very inefficient and everyone of us will pay for it," he added.

BLOCKS OF COMMERCE

Breaking the world into regional trading blocs "may be detrimental, but if we can use a bilateral agreement, regional agreements as building blocks of global agreements, and build confidence in the system and give economies time to make structural adjustments I think we need to continue and this can pave the way for multilateral agreements, "he said.

"I think we will serve all countries better if we have an agreement at the WTO level.The WTO remains a very important institution to defend, to preserve, because I think that a system multilateral rules-based "serves the interests of better countries.

BUDGET OF SINGAPORE

"Our priority areas remain economic restructuring", with innovation being at the heart of the work of policy makers. "The other big area concerns infrastructure development", urbanization being a major trend in Asia.

Tax structure

"I have already had many, many discussions with my staff on the broad lines of what we are going to announce, but not only for this year, but for a number of years, about the changes we need to make to our Structure of our revenue structure We believe that we should not plan on an annual basis, but that we need to take a longer-term view of some of our needs. "

Imposing less labor and capital more "is one of the options we are looking at", but "we have a whole range of possible instruments". The consumption tax will always be an important part of the tax base over the next five years, he said.

BLOOMBERG