A man takes picture along Boat Quay in Singapore on Oct 20, 2022. (ROSLAN RAHMAN / AFP)
A slower economic outlook for Singapore is expected to be replicated in the rest of the region.
The Monetary Authority of Singapore (MAS) said in its biannual macroeconomic review last week that the city-state’s GDP growth this year would ease to 3 to 4 percent and is projected to slow further to a “below trend” pace in 2023.
The Monetary Authority of Singapore (MAS) said in its biannual macroeconomic review last week that the city-state’s GDP growth this year would ease to 3 to 4 percent and is projected to slow further to a “below trend” pace in 2023
Modest consumption and weaker demand for electronic exports are seen weighing on Singapore’s economic expansion. Analysts said the same factors will likewise dampen growth in other Southeast Asian countries.
“Singapore’s economy will slow in tandem with the deceleration in global demand which will also affect growth in the rest of Southeast Asia,” said Manu Bhaskaran, CEO of Singapore-based independent research and advisory firm Centennial Asia Advisors.
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Lawrence Loh, director of the Centre for Governance and Sustainability at the National University of Singapore (NUS) Business School, said Singapore’s economic slowdown will have a bearing on the region because it has “an open economy with deep interactions” with its neighboring countries.
Loh cited Indonesia and Malaysia, which are among Singapore’s top trading partners and top investment destinations.
The MAS said the global electronics cycle is “on the brink of a downturn”, noting that global chip sales started contracting in the third quarter. The domestic semiconductor industry is also grappling with rising energy costs.
The reopening of borders has boosted the travel and tourism sector and encouraged domestic consumption. But the MAS noted that higher inflation and economic uncertainties could moderate the pace of discretionary spending.
Trinh Nguyen, senior economist at French investment bank Natixis, said a slower Singapore economy “is likely to be repeated across ASEAN”, the Association of Southeast Asian Nations. This is especially true for export-dependent economies like Malaysia and Vietnam.
Natixis sees Singapore’s GDP growth slowing to 2.6 percent in 2023. Nguyen said that while pent-up consumer demand has supported economic rebound in the past few months, the future is not as sanguine.
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“Interest rates are higher and that will lead to softening of the real estate market, although it is still rather resilient. However, a strong Singapore dollar and weakening global demand means that external (factors) will underwhelm (Singapore’s growth prospects),” she said.
Nawazish Mirza, professor of finance at the French-based Excelia Business School, said slowing growth may also hurt Singapore’s long-term goal to decarbonize its economy. The city-state is aiming to achieve net zero emissions by 2050.
“To provide a more conducive operating environment for the industry, the government may have to delay its plans of increasing the carbon tax. Similarly, there will be financial constraints to support decarbonized technological transition,” Mirza said.
Singapore implemented a carbon tax, the first carbon pricing program in Southeast Asia, in January 2019. The carbon tax level is set at S$5 ($3.54) per metric ton of carbon dioxide equivalent (tCO2e) from 2019 to 2023. But the Singapore government is planning to increase its carbon tax to S$25/tCO2e in 2024-2025, S$45/tCO2e in 2026-2027 and S$50-80/tCO2e by 2030 to achieve its decarbonization target.
Nguyen, of Natixis, said Singapore is vulnerable to rising sea levels and this is why it is important to have set a net zero target.
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“The question is how Singapore will get there, and so the impact to GDP is not obvious as it is likely to target energy efficiency first while it figures out how to change its existing energy mix,” she said, noting that Singapore remains dependent on petroleum products.
For Loh, of NUS, the quest to achieve net zero is not incompatible with economic growth. He said decarbonization may even encourage investment and consumer spending.
“While businesses may incur additional overall costs for net zero, these can be offset by the lower risk profiles which translate to decreases in financing costs as well as the new revenue opportunities brought about by environmentally oriented pursuits,” he said.
Singapore’s Deputy Prime Minister Lawrence Wong said on Oct 25 that the city-state has raised its national climate target to achieve net zero emissions by 2050.
Singapore will submit the enhanced targets to the 27th Conference of the Parties of the United Nations Framework Convention on Climate Change, more widely known as COP27. COP27 participants will meet from Nov 6 to 18 in Egypt.
prime@chinadailyapac.com