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The Straits Times says

Be watchful, but do not panic

Twenty-sixteen has not begun well for the world economy, and particularly its barometer, the financial markets. Volatility is coursing through everywhere, most spectacularly in commodities, led by oil, but now joined by metals in a big way. Real estate prices are falling. Bond yields are shrinking as investors flee stocks to the relative safety of fixed-income instruments. Investment managers are looking at further falls as the International Energy Agency this week warned of a world "drowning" in oil oversupply. The worst of the doomsayers think the global economy is facing conditions more dire than those seen in 2008.

China is the most obvious source of the gloom. As the No. 2 economy, and biggest in purchasing power parity terms, it has been a major driver of global growth. Now, as it shifts to a more moderate speed, or worse, the pain is spreading. But there are other factors at play, including technological change and a secular slowdown in trade, that also are responsible for the economic funk. Besides, the outlook on employment is not pretty; recent studies by the World Economic Forum and the International Labour Organisation are worrying. There also is uneasiness that the world's central banks may not have too many bolts left to shoot and that debts that piled up over the past eight years may never be repaid. Besides, there is the growing threat of terrorism, dramatised by this week's announcement on the arrests of Bangladeshi terror suspects in Singapore.

That is the broad picture, no doubt. But amid the despondency, some factors should not be missed. The US economy, the world's biggest, remains an island of stability, in part because exports as a share of its gross domestic product do not have the same salience as, say, in Singapore or South Korea. The market of last resort is still in expansion, going by data on the housing market, unemployment and government spending. Neither is the European economy falling off. Indeed, even in China, no one expects the economy to slide too significantly, although billionaire investor George Soros has now added his voice to those who think that a hard landing is on the cards. Long-term investors are still putting money into the mainland. The news from Davos is that China has said it will not devalue the yuan to seek market competitiveness. In a moderate way, Asean has moved closer to being a common market.

Singapore, whose trade is more than double its GDP, cannot expect to be insulated from all this. Indeed, it is already feeling the squalls. As during the Asian financial crisis of the late 1990s, it should look to turn the looming crisis into an opportunity by raising its efficiency, improving productivity, and enhancing national cohesiveness. There are enough buttons to press and levers to pull should the situation become truly dire, but it is mercifully not there yet.

A version of this article appeared in the print edition of The Straits Times on January 23, 2016, with the headline 'Be watchful, but do not panic'. Print Edition | Subscribe