Welcome to the Corona Correction Series in association with Refinitiv, I'm your host,
Roger Hirst.
Covid-19 is impacting every country on earth, but how each country reacts to the crisis
will have long term consequences.
Singapore is a small, prosperous and dynamic country that is regarded as a regional leader
in terms of responding to an economic crisis.
But obviously this situation is much more than just that.
After initial successes the infection rate in the country has picked up dramatically,
which has led to a swift response from the government.
I asked Refinitiv's Solutions Director in ASEAN Garett Lim, to outline Singapore's policy
response compared to other regions and countries.
I think one of the key things everyone highlighted is really just globaly how the economies are
really dealing with the stimulus packages right now.
Headline numbers, as you know are very, very high.
We've got, you know, from bazooka type 2.3 trillion to the US, which is around 10 percent
of GDP.
And even here in Singapore, we have allocated around $60 billion of that, which is about
12 percent of GDP.
Now, these numbers are great and high in percentage of GDP, and one of the key things is that
they've been very, very aggressive and come out very, very quickly.
But I think one thing that we need to look for, for the global economy is how this money
actually gets transmitted into the areas which is very highly needed.
So how quickly will that money get to that man, to that business, before we start getting
a situation where we have a solvency problem?
So this is a really key issue here in Singapore alone.
We've seen some numbers of as I mentioned, 60 billion is a very high proportion broken
up in very different packages.
But certainly I think speaking to businesses speaking to individuals, that number is on
average hitting accounts, bank accounts within two weeks, which is quite remarkable.
And in the US now, I mean, we're a month after the 2.3 trillion was announced, and we're
only seeing the checks actually arriving.
We saw some of the money hitting the bank accounts last week, but really the reality
is that it's taken a month in the US, and it's taken Singapore, albeit a very, very
small country, around 10 days to two weeks.
So it's that is a great, great achievement from Singapore.
So I think this is a very key indicator.
Not just in the US or Singapore, but also in the UK as well.
As we all know, the numbers are very big is really how it gets into into that.
So I think the other thing, the other narrative, which I think a lot of people want to look
at is the impact of the Singapore economy.
We are sometimes used as a leading indicator because of the global trade that we are very,
very exposed to, whether we like it or not.
We are going to see GDP numbers in the negative territory.
We're talking about minus 7 to minus 8 percent.
And in fact, last week, the Singapore government actually announced that their numbers of minus
3, minus 4 percent has got downside projections all over that.
So I think minus 6 to minus 8 percent seems to be the consensus number for Singapore.
The great thing is out in Singapore and also I would say in the rest of ASEAN region, the
credit quality generally for economies has been pretty good.
Non-performing loans ratios in Singapore, only 2.3, 2.4 percent.
So that's pretty good.
And in ASEAN as well, the credit quality has been pretty good as well.
But I think one of the key things that we will look for in Singapore going forward in
the next few months is really the unemployment rate.
The government has been very, very proactive and very, very candid in terms of making sure
employers do all it can to really keep the employees in place and is giving a lot of
fiscal measures and also, as I mentioned, lots of money being sent to them directly
to make sure that unemployment rate doesn't blow out.
We're currently up 2.3 percent in Singapore, we are expecting a number later on this week
at 2.6 percent.
And I think that number will obviously blow out maybe in about 5 to 6 percent range.
The reason why we mentioned 5 to 6 percent range is because during 2003 in SARS, we actually
saw the unemployment rate rise up to about 5 percent.
So I think if the government can keep that number below 5 percent, that would be a superb
achievement.
And I think it's really important for the rest of ASEAN as well.
During the Asian financial crisis in 1998, we saw unemployment rates blow up to 12, 13
percent.
So we saw some very negative, not only financial, but social consequences as well.
So this is an area which I think the government is very, very keen to make sure that they're
on top of, not in Singapore, but also the rest of Asia as well.
So these are the sort of key responses that the Asian economies have been have been doing
to try and tackle Covid.
I think the big question is really how do we get away from being less reliant on global
growth?
It's going to take a long while.
So I think the governments in Asia now need to look at increasing GDP, but I think the
countries which will do very well from this are the countries which will encourage the
different types of composition of growth.
So we can't rely on the old growth levers anymore.
We need to embrace and adopt a new approach and look at different ways to encourage GDP
growth.
Because when growth comes back, and it will, economies which will do very well, will be
the ones which are more open to changes.
And I think that's something which lots of governments are trying to adopt at the moment.
So in Singapore, as I mentioned, keeping people employed is very key because when the bounce
does come back, Singapore needs to be in a position to really benefit from that rise
in global growth.
And whether it means that the economy has to change the way to does things.
That's what it has to do.
We have to play the cards we are dealt with right now.
I think that the moment now there's a big change of mindset right now.
The economies which are going to win are not the ones which are going to grow the most,
they are the are ones we sure are going to probably lose the least.
So in other words, the winners are really going to be the ones who lose the least from
this.
And I think as soon as, as quick as governments understand that and try and adopt that attitude,
those economies will do very well.
Singapore's government has taken a pragmatic view of the long term prospects and is in
this for the long haul.
The winners will emerge as those countries who suffer the least from the fallout and
the experience of the '97 '98 Asia crisis is still fresh in the mind.
And we can see just how dramatic that event was by some of the Asian currencies which
collapsed at an unprecedented rate back then, making today's currency moves look unremarkable.
The focus today is on keeping employment ticking over even if output is diminished, in order
to both maintain base levels of income and ensure that the economic framework remains
so that advantage can be taken of any economic rebound that materializes.
The big question is whether other countries, particularly those with large economies, can
also implement sufficiently flexible policies.
We'll see you later with another update.