If a year can represent a long time in politics, it can seem like an even longer epoch in the world of economics.
No single economy reflects this better than Singapore, which is set to follow up incremental and impressive growth in 2019 with a sharp contraction over the course of the next seven months.
We’ll delve deeper into the figures below while asking how Singapore can enhance its economic portents for the future.
2019 and now – what has changed?
Singapore entered 2019 in relatively robust economic health, having recorded total growth of 3.1% during the previous year.
However, the global economy was braced for a significant contraction in 2019, and it was with this in mind that analysts at Bloomberg predicted modest growth of just 0.6% for Singapore in 2019.
Interestingly, Singapore’s economy actually grew by 0.7% last year, improving on the published forecasts and offering some relative optimism for the near-term. Still, this represented Singapore’s lowest level of growth since 2009, when the world was in the grips of a recession.
According to experts, the Singapore economy bottomed-out during the second half of 2019, and global sentiment wavered, and the world edged towards the precipice of another recession. However, this was nothing compared with what has followed this year, with the Covid-19 pandemic decimating Asian economies and those across the globe.
This has had a huge socio-economic impact in Singapore, with Standard Chartered Bank recently joining the chorus of those downgrading the nation’s economic outlook for 2020.
Overall, banks are predicted that the economy will shrink by 2% as a result of the outbreak, with this forecast having been slashed from an initial projection of o.8% growth.
How can Singapore cope with the fallout?
Singapore is already one of the numerous nations to have pledged money to help curtail the economic impact of Covid-19 while extending the quantitative easing measures that they first rolled out in Q3 of last year as the economy began to waver.
However, it should be noted that this will cause Singapore’s debt-to-GDP ratio to increase to approximately 120% by the end of 2020, creating a widening deficit that may be hard to overcome over time.
It’s also interesting to note that the Singapore authorities are now allowing SMEs to borrow at a base interest rate of just 0.1% over a year-year tenor as a way of stimulating growth and minimizing commercial losses.
However, this is bad news for the value of the Singapore dollar, which has already lost ground to the USD and similar currencies as a result of its low base rate. This trend is unlikely to change anytime soon either, creating a scenario where natural growth is stunted and capped within a relatively narrow range.
Make no mistake; a competitive currency value can stimulate demand from overseas, underpin high forex trading volumes and support a nation’s stocks, and this should not be overlooked by Singaporean authorities as they look to grow their economy over time.
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