S'pore's challenge is to avoid economic scarring: Heng

As the Covid-19 pandemic continues to rage, the immediate challenge for countries, including Singapore, is to avoid economic scarring, said Deputy Prime Minister Heng Swee Keat. They must also be mentally prepared for a long and uncertain battle against the virus.

Global cooperation is needed to contain Covid-19, and if the United States and China do not find a way to compete constructively, the world may be caught in a vicious circle of never-ending waves of infection, he said yesterday.

Speaking at the virtual 26th International Conference on the Future of Asia, better known as the Nikkei conference after its organiser, media firm Nikkei, Mr Heng said the world is fighting a very agile virus.

"Whenever there is any gap in our defence, it gets through, and multiplies exponentially," he said.

To prevent economic scarring, the Government last year committed close to $100 billion - or 20 per cent of gross domestic product - in Covid-19 support across five Budgets. Explaining the reason for this extensive support, Mr Heng said: "If companies were to be closed and workers retrenched, it will be very hard to rebuild when the situation gets better. So, maintaining that capability is very important."

Singapore's economy contracted by an unprecedented 5.4 per cent last year, and was set for a gradual recovery this year. But growth may decline in the April to June period from the previous quarter because of recently tightened Covid-19 curbs, putting at risk the full-year target of more than 6 per cent.

While the resident unemployment rate eased to 4 per cent in March, compared with the peak of 4.8 per cent last September, it remains to be seen if the figures will be affected by the tightened restrictions.

"With the emergence of new, more virulent strains, we are also seeing a resurgence in cases," Mr Heng said of Covid-19. "Globally, we are experiencing the largest wave of infection since the pandemic started."

Unless global cooperation to contain the virus is stepped up, he said, there could be endless waves of infection, each resulting in potentially more virulent strains, undermining existing measures and vaccines. This could lead to fresh lockdowns and disruptions.

But such cooperation is increasingly under pressure, owing to growing strategic competition between the US and China. He said: "For both the US and China, domestic considerations remain paramount. Neither can afford to appear weak nor be seen to be conceding ground to the other."

While it is not unusual for major powers to have disagreements or to compete for influence, what is important, he said, is that competition be conducted within a stable framework to defuse tensions and avoid a situation where differing interests prevent cooperation even on common interests - or worse, escalate into armed conflict.

"While I believe that competition may be inevitable, it need not be zero sum. It is possible for both sides to find a new mode of constructive competition."

There have been encouraging steps - such as the first high-level meeting between the two sides in Alaska in March, and early signs of cooperation on climate change.

Mr Heng said he hoped that the US and China would eventually arrive at a framework for stable competition. He also said that most countries wanted to strengthen relations with both nations.

He expressed optimism that Asian nations can emerge stronger from the crisis by investing in one another, strengthening regional architecture and partnerships, and taking a constructive approach to handling hot spots in the region.

"In this way, Asia and the world can emerge stronger together from Covid-19, and contribute to a better global order."