Singapore sees solid Asean growth despite risks

Singapore Finance Minister Heng Swee Keat speaks at a UBS client conference in Singapore on Jan 14, 2019. He also attended the meeting of Asean finance ministers in Chiang Rai. (Reuters photo)

CHIANG RAI: Singapore and other Southeast Asian economies are poised to remain resilient in the face of increasingly dour signs on the global economy, Singapore Finance Minister Heng Swee Keat said.

Economies in the 10-member Association of Southeast Asian Nations “and Asean as a group both continue to grow quite well even this year and next,” Heng told Bloomberg Television on the sidelines of meetings of the regional bloc in Chiang Rai. “There will still be growth even though the growth will be uneven across the world and it’ll be slower than before.”

Global growth has lost momentum since the beginning of the year, a knock for trade-reliant nations in Southeast Asia, especially Singapore. For now, regional growth seems to be holding up, with the Asian Development Bank forecasting 4.9% expansion in 2019.

In Singapore, authorities see growth easing to slightly below the midpoint of a 1.5 to 3.5% range this year, after reaching 3.3% last year, with inflation remaining benign. Heng said the growth forecast isn’t being revised at this stage.

Trade risks

The finance minister reiterated that a potential worsening of the US-China trade war is a risk to the global economy, with the two powers yet to ink an agreement that would relieve any of the tariffs put in place on US$360 billion in goods. Brexit uncertainties and a general malaise among workers about how to adapt amid rapid technological change also weigh on world growth prospects.

“The investment sentiment has been affected, uncertainty has increased,” said Heng. “For investors making long-term investments, making major investments, they would adopt a wait-and-see approach, and this can in turn affect sentiments further.”

In Southeast Asia, regional economies are benefiting as companies adjust supply chains to take account of rising tariffs in the United States and China, Heng said.

Conversations with investors “have been generally quite positive, still,” Heng said. “There is a sense that the global supply chain is re-configuring quite rapidly and now people are thinking about the resilience of the supply chain,” which means diversification and movement of operations to Asean economies, he said.

Heng said he’s heard from logistics operators who report a “far higher volume of business” as they move heavy machinery and goods from around the region.

Fiscal and monetary authorities have a smaller margin for managing economic problems after taking unconventional policy measures in the aftermath of the last financial crisis, Heng said.

The minister also said US-China tensions aren’t a “one-off dispute” as intellectual property rights and broader competition over technology will continue. “There will be many ups and downs in the coming months and years,” he said.

“I’m hopeful that good sense will prevail and there will be a deal between the US and China,” he said, adding the signals are more positive recently on their trade talks.