SINGAPORE - Singaporeans must be prepared for more economic challenges in the year ahead even as the Government does all it can to cushion the impact of the Russia-Ukraine war, especially on the cost of living, said Prime Minister Lee Hsien Loong on Sunday (May 1).
"The fundamental solution... is to make ourselves more productive, to transform our businesses, to grow our economy, to uplift everyone," he noted. "Then our incomes can go up, and that can more than make up for higher prices of energy and food. Then we can all become better off in real terms."
PM Lee was addressing unionists at the May Day Rally at Downtown East, with some attending the hybrid event virtually.
In his speech, he outlined the Government's measures to alleviate cost-of-living pressures on Singaporeans. These include the $560 million Household Support Package announced at Budget 2022, which comprises U-Save and service and conservancy charges rebates and Community Development Council vouchers to reduce living expenses for nearly all households - with lower- and middle-income households receiving more.
The Monetary Authority of Singapore has also tightened monetary policy to reduce imported inflation, leading to the Singapore dollar appreciating.
Singapore is also taking steps to secure its own food and energy supplies, in the event of these being disrupted by the ongoing Russian invasion of Ukraine, which started on Feb 24.
"All this will help, but we must be prepared for more economic challenges in the year ahead," said PM Lee, pointing to inflation remaining high and central banks in developed countries tightening their monetary policies and raising interest rates.
"Global growth will be weaker, and there may be a recession within the next two years," he warned. "We have to face up to these realities."
Singapore, with its tight integration in the global economy and small size, will always be a price taker when it comes to world markets, said PM Lee. "We have very little bargaining power. If the prices go up, our prices go up. If supplies are short, we are squeezed. We cannot avoid these global headwinds."
Noting that Singapore imports nearly all its supplies of energy, he said that the doubling of oil prices in recent months has come at a cost - to households, businesses and the Government - of around $8 billion, as estimated by the Ministry of Trade and Industry.
He added: "There are limits to what Singapore can do to influence broader international trends. We will push back against deglobalisation. We will speak up to encourage the US and China to constructively engage each other.
"But ultimately, all these matters depend on the major powers themselves, and the relations between them, and how the war in Ukraine unfolds."
Said PM Lee: "We have speaking rights, but we are a small voice. Singapore has to take the world as it is, and develop a strategy that works for us in this troubled environment."
Turning inwards, relying heaving on domestic markets and producing more things onshore is a viable strategy for larger countries - but this is "not a choice open to Singapore", he said.
“Our strategy can only be one - and that is to stay open, to make our economy stronger, more resilient, and to keep on seizing opportunities for growth, developing new capabilities and becoming a more competitive economy,” said the Prime Minister.
"Because if we do that, then despite the uncertain climate, despite the pressures against globalisation, investors will still find it worthwhile to put their projects in Singapore, our exports will still find foreign markets, and we can still earn a living for ourselves in the world."