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Analysis: From Singapore, a grim view

By Asia Asset Management  
Aug 14, 2019

Singapore, that poster child for a certain vision of the so-called Asian century, looks to be in danger of having its poster fall off the billboard. The city state’s Ministry of Trade and Industry (MTI) has slashed its gross domestic product growth forecast for 2019 to between zero and 1.0% – within spitting distance of an actual recession – from 1.5%-2.5% previously,

What’s more, the economy contracted 3.3% in April through June on a quarter-on-quarter seasonally-adjusted annualised basis, a reversal from the 3.8% growth in the first three months of the year. This from a country that prides itself on being the most business-friendly environment in Asia, and a government whose fundamental value case for its authoritarian style was the prosperity of its citizens.

Admittedly, Singapore has plenty of external factors to legitimately blame. As well as the worsening overall global growth picture, the MTI’s statement notes that growth prospects of key emerging markets and developing economies such as the ASEAN-5 and China have worsened, partly due to escalation of the US-China trade conflict in recent months. ASEAN-5 refers to Indonesia, Malaysia, Philippines, Singapore and Thailand, the five original members of the Association of Southeast Asian Nations regional grouping.

The picture is darkened further by a sectoral downturn in the global electronics cycle, which of course heavily impacts Asia. MTI also warns of slackening growth in many of Singapore’s key final demand markets in the second half of 2019, particularly the US and the eurozone. Furthermore, as well as the potential impact of Brexit in Europe, it cites “risks arising from the uncertainties in Hong Kong, the trade dispute between Japan and South Korea, as well as geopolitical tensions in North Korea and the Strait of Hormuz”.

Singapore grew off an international trade system where, at least since 1989, politics stayed substantially out of business, and where in certain contexts, good business justified bad politics. No matter how closed a political system it operated under, Singapore Inc. could function safely on the assumption that its own government and its larger trading partners would not try to turn the strong-arm political tactics deployed domestically on the international stage. That’s no longer the case.

Authoritarianism may have worked for a certain historical moment in Asia and elsewhere. But it certainly doesn’t seem to be working now. You only need to look at Hong Kong. Or Moscow. Or even Washington DC, where the most authoritarian US president in decades seems to be wreaking economic and social carnage.

Singapore’s ruling elite now faces the prospect of its one legitimating factor disappearing, perhaps for good. And it would be blind hypocrisy to complain of strong-arm politicians acting their nature, just when they do so internationally as well as domestically. Maybe it’s about time to try something different.