It is a sign of the times when a preliminary estimate, that the economy grew by 1.8 per cent in 2016, was greeted with relief. It had been unexpectedly good - economists had expected it to be 1.4 per cent - boosted by stronger-than-expected 9.1 per cent growth in the last quarter of the year. The official forecast for this year is between 1 and 3 per cent. These are sobering numbers not normally associated with dynamic, fast-growing economies but they reflect the current economic reality. Singapore's economy is undergoing structural change amid a global slowdown. This is an unusually challenging combination. It calls for trying to encourage firms to transform their businesses, make new investments to increase productivity, and promote innovation while coping with a slowdown in demand. The question is whether this national juggling act can be carried out successfully. All eyes will be on the report of the Committee for the Future Economy, to be released soon, and on the Budget Statement which Finance Minister Heng Swee Keat will deliver on Feb 20. They should provide some answers to how Singapore can position itself for the long term while coping with current difficulties.
Getting the balance right between the two objectives is of paramount importance. Economic restructuring is critical for the country's long-term viability. In the process, uncompetitive firms will go out of business, to be replaced by more productive and creative companies. That is how an economy grows. But it is also to be expected that most businesses have a tendency to focus on today's problems, not tomorrow's. According to a Singapore Business Federation report released last month, more than a third of companies surveyed were ambivalent or disagreed with the call to transform their businesses to meet the new challenges of the times. They were more focused on getting through the current slowdown, and wanted more government help to enable them to do so. Almost half believed that the economic climate this year will be worse than last year's.
Fortunately, the Government is in a strong fiscal position to take counter-cyclical measures should the need arise. But support has to be carefully targeted at companies that show promise and have made the effort to improve. This is not easy, which is why progress on the productivity front has been slow and painful. Ultimately, it is up to Singapore companies and their management to rise to the challenge and earn their keep.
On its part, the Government has to press on with the restructuring effort, to wean the economy off cheap foreign labour and upgrade and reskill the local workforce. These are testing times but they can be a transformative experience that will make Singapore stronger and more resilient. As the saying goes, when the going gets tough, the tough get going.