What the PM did not talk about: The economy

Prime Minister Lee Hsien Loong talked of a great many things during his National Day Rally speech. What he did not talk - much - about was the economy.

However, the economy is the bedrock on which all grand plans to finance increased spending on social programmes and public infrastructure rest. It is important that this be understood and accepted by Singaporeans. Equally, they should confront the brute reality that Singapore's economy does not exist in a vacuum. Ours is a contingent economy dependent both on how the large economies perform and on how relevant we can make ourselves to them.

Seven years out from the Great Financial Crisis, and the global economy is still in a slow growth mode and slowing further.

Europe is in political and economic disarray. Japan is getting ever deeper into debt and the expensive gamble of Abenomics seems increasingly unlikely to pay off.

Singaporean workers need to be prepared to support that spirit of economic adventure. They need to be willing to relocate and work in various parts of the world - not all of these being convenient choices.

The United States, though much improved since its nadir in 2009, cannot seem to break out from its marginal growth curve.

China - the great emergent market hope - has equity markets quivering with fears of a structural slowdown while its Bric companions - Brazil, Russia and India - have all lost much of their lustre.

These phenomena have a marked impact on the performance of the Singapore economy. The initial gross domestic product forecast for this year had been 2 to 4 per cent growth. This would have been respectable. However, the Ministry of Trade and Industry has since revised that projection to just 2 to 2.5 per cent.

Further, the Singapore economy is showing increasing signs of entering a technical recession - this is when there are two successive quarters of contraction. The knock-on effects on employment, wage growth and consumption factors should not take long to make themselves felt.

Singapore's Consumer Price Index (CPI) - the measure for inflation - is forecast to decline 0.21 point from now until the first half of next year. This moderation in the CPI is small comfort.

It is likely an indicator of falling underlying demand as well as downward price corrections in the property and car purchase markets, both of which are due in part to government policy - the cooling measures and expanded quota for Certificates of Entitlement respectively.

We need to confront the reality that the Singapore economy is sailing into headwinds that are strengthening and probably enduring.

The fall in the price of oil to just US$40 (S$56) a barrel reflects long-term market sentiment that demand is weak and will stay that way for some time.

The sustained contraction in our manufacturing sector should inject doubt over its viability in the longer term.

While financial services remain a source of strength, the barriers to entry in employment are high and only a small number of Singaporeans can expect to make a career in this highly competitive industry.

What does this mean?

Singapore businesses need to seek out non-traditional sources of growth. We need to adventure to frontier markets such as East Africa. Economies such as Rwanda, Uganda, Kenya in West Africa and Angola in the south of the continent are growing fast. There are political, policy and infrastructure risks in all these economies. However, gone are the days when Singapore companies can expect an easy flow of business. They can also no longer expect to make reasonable returns by accessing "comfortable" advanced economies since these are all experiencing marginal growth, if any at all. It is time for us to saddle up for the new frontiers of growth and be prepared to deal with the uncertainties as part of the price of chasing growth.

Singaporean workers need to be prepared to support that spirit of economic adventure. They need to be willing to relocate and work in various parts of the world - not all of these being convenient choices. But if our companies cannot rely on Singaporeans to support expansion, then Singaporeans should not be surprised if foreigners step in to do so.

In the longer term, though, Singaporeans need to be prepared for lower growth coupled with higher volatility as the norm. This means reduced job security and greater pressure to up- or re-skill to meet changing market demands. This is neither caused by the Government nor the result of foreign labour input. It is a simple fact of the nature of the global economy. We need to stop blaming others and start owning our own economic destiny.

  • The writer is chief executive officer of Future-Moves Group.
  • See Opinion for Part 2 of National Day Rally excerpts, on external environment and the need for quality leaders.
A version of this article appeared in the print edition of The Straits Times on August 26, 2015, with the headline 'What the PM did not talk about: The economy'. Print Edition | Subscribe