As global monetary conditions tighten, interest rates are set to rise and small and medium enterprises in Singapore should prepare themselves for higher borrowing costs, Minister for Trade and Industry Lim Hng Kiang said yesterday.
"It would not be prudent for the government to lower borrowing costs for businesses artificially," he said, in response to a question by Mr Arthur Fong (West Coast GRC) on the impact of the rising interest rate environment as the United States tapers off its third round of quantitative easing.
What the Government will do, said Mr Lim, is continue to help SMEs raise their capabilities and productivity so they can increase their revenue to cope with the higher costs. Agencies such as SPRING Singapore also ensure that credit remains accessible to SMEs through programmes such as the Micro Loan Programme, he added.
But the Minister also noted that the impact on Singapore is likely to be limited, as the global market is "likely to adjust in an orderly manner" to the tapering.
Mr Liang Eng Hwa (Holland-Bukit Timah GRC) asked a supplementary question on whether Japan's own round of quantitative easing might see another source of "hot money" flowing to Singapore, or competitive devaluation in the region.
To that, Mr Lim said that although the policies of major economies may differ, the overall global conditions still point to a tightening of monetary policies.
