Professor Tan Eng Chye, President, NUS,
Ladies and gentlemen,
2. I am pleased to join you at the 13th annual MTI Economic Dialogue. This is indeed a valuable and useful platform where we can discuss important issues with students as well as future leaders like you, and encourage you to think critically.
3. The theme for this year’s dialogue is ‘Disruptions and Opportunities from COVID-19’. Before the COVID-19 pandemic, the world was already becoming more complex and uncertain. The COVID-19 pandemic has accentuated this and accelerated the structural shifts. These shifts present significant challenges for the Singapore economy, but also offer us new opportunities. I will touch on some of these disruptions today, and also discuss how Singapore can emerge stronger from this pandemic.
Impact of COVID-19 on Singapore’s economy
4. The COVID-19 pandemic has caused massive economic disruptions globally. Domestically, the Singapore economy contracted by 5.4 per cent in 2020, our worst full-year recession since independence. The deep downturn was caused by both demand- and supply-side shocks to our economy. For example, we had experienced a fall in external demand for our goods and services, including tourism demand, due to the sharp slowdown in major economies and the widespread imposition of travel restrictions as countries around the world tried to contain the pandemic. Our economy was also adversely affected by supply chain disruptions, and the Circuit Breaker measures that were implemented to curb the spread of the virus.
5. The Singapore economy has shown promising signs of recovery this year. In the second quarter of 2021, GDP rose by 14.7 per cent on a year-on-year basis, faster than the 1.5 per cent growth in the previous quarter. We expect the Singapore economy to continue to recover gradually in the second half of the year, given the global economic recovery that is underway. With our domestic COVID-19 situation remaining stable and our vaccination rates continuing to improve, we should also be able to progressively ease our border and domestic restrictions over the course of the year. Taking these factors into account, MTI has recently raised our GDP growth forecast for the year from “4 to 6 per cent” to “6 to 7 per cent”.
6. Across sectors, however, the impact of COVID-19 has been variegated, and their recovery is likely to remain uneven.
a. For example, the tourism- and aviation-related sectors are expected to see a slow and protracted recovery, as global travel restrictions remain in place and global travel demand is also likely to be sluggish amidst the spread of more contagious strains of the virus, such as the Delta variant.
b. Consumer-facing sectors such as retail and F&B have been affected by restrictions on group sizes and dining-in, but should gradually recover as restrictions are eased over the course of the year, and consumer sentiments improve in tandem with better economic outlook and labour market conditions.
c. Sectors that rely heavily on migrant workers, such as construction and marine & offshore engineering, have faced severe disruptions in manpower supply as we tightened our border restrictions on the entry of migrant workers. These sectors are likely to see slower recovery given the continued labour shortages that will slow down their recovery progress.
d. On the other hand, outward-oriented sectors such as manufacturing, wholesale trade and finance & insurance are expected to record healthy growth this year, driven by the rebound in global demand.
Singapore’s position in the global economy
7. COVID-19 has also highlighted the importance of having resilient supply chains. This is now a priority for businesses and countries. When Vice-President of the United States, Ms Kamala Harris visited Singapore, we discussed the issue of supply chain resilience and this was also an area of focus during her visit. In recent years, the pursuit of efficiency has nudged businesses around the world to adopt the “just-in-time” approach to save time and costs. During the pandemic, many companies found themselves with little buffer to cope with supply chain disruptions caused by national lockdowns and global shipping delays. This affected a wide range of goods, from daily essentials and consumer goods to critical supplies such as medical products, pharmaceutical ingredients and manufacturing inputs, even masks and vaccines. As a result, many businesses have had to re-evaluate their supply chains and diversify operations to reduce over-reliance on a single source of supplies, moving from “just-in-time” to “just-in-case”.
8. Singapore must adapt to the ongoing shifts in global supply chains. Many companies around the world have started to localise their business operations in favour of national and regional supply chains. This can be problematic for a small and open economy like ours as we rely on global trade to survive. Our challenges are exacerbated by nationalistic sentiments and growing geopolitical and economic tensions, which have turned countries inwards and created an increasingly fragmented world.
9. We need to adapt too. In order to strengthen our supply chain resilience, we have adopted a multi-pronged strategy that builds resilience at the national, industry and firm levels. Internationally, Singapore has championed efforts to maintain open supply chains since the onset of the pandemic. We have kept our sea and air links open, and facilitated trade of essential goods and services. Singapore and New Zealand also initiated the joint ministerial statement on supply chain connectivity to affirm our shared commitment to maintain supply chain connectivity. As the world transitions from “pandemic to endemic”, it is even more important to strengthen global trade and investment linkages to support economic recovery. Singapore will continue to work with our partners in the region to keep trade flowing and safeguard the open, rules-based multilateral trading system.
Opportunities from COVID-19
10. As Singapore emerges from the COVID-19 pandemic and sets its sights ahead, we need to prepare for the key shifts in the global economy that COVID-19 has caused or accelerated:
a. A changing global balance, with a world that is becoming increasingly fragmented on multiple fronts, such as technology and trade.
b. Accelerating industry consolidation and churn, with COVID-19 shifting competitive factors amongst countries, businesses and people.
c. Accelerating digital transformation and innovation in business processes and lifestyles.
d. Changing consumer preferences, with increasing familiarity and even preferences for e-commerce and virtual experiences.
e. An increased focus on sustainability, and the need for action to arrest the impact of climate change.
11. These shifts will cause a great impact on the trajectory of the global economy. Singapore can leverage opportunities that come our way, and emerge stronger from the pandemic. I will talk about three key opportunities that we can take advantage of.
12. First, we can build a Virtually Unlimited Singapore. During the pandemic, the significance of the virtual realm has become even more evident. We need to create new virtual frontiers to transcend the constraints of our physical size and physical boundaries. For enterprises, we can establish a virtual marketplace of goods and services that allows businesses to participate in new markets and reach customers from all over the world. For workers, we can encourage and support more virtual training, virtual career development, and virtual collaboration tools. For example, a startup called ZilLearn Skills provides personalised career and learning guidance to individuals online by leveraging data-driven job market insights.
13. Second, we can seize new growth opportunities in sustainability and the green economy. Singapore has the opportunity to establish ourselves as a sustainability hub. We can capture first-mover advantage in areas such as carbon trading and services, low-carbon technologies, green financing and sustainable infrastructure. We will help our existing industries transition to a lower-carbon economy, and enable our companies to create new sustainable products and solutions.
14. Third, we need to help our enterprises grow and develop more homegrown global champions. Our large enterprises make disproportionate contributions to our economy, whether it is in terms of GDP, employment or productivity. Many promising homegrown unicorns have emerged over the years, including Grab, PatSnap, SEA Group and Razer. These large enterprises have the potential to expand further and compete successfully in the global market. The challenge ahead of us is to groom the next generation of future champions and soon-to-be unicorns, or “soonicorns” for short. This is important in order to provide our people with new and exciting opportunities for many years to come.
15. The COVID-19 pandemic has disrupted our lives, our jobs, and the economy. But there are also bright spots and new opportunities for us to look forward to. As long as we maintain our can-do spirit, remain nimble and adaptable, and embrace new ideas and innovation, I am confident that Singapore will continue to thrive. I am heartened that students like yourselves are interested in present-day economic issues, and I look forward to hearing your thoughts in the dialogue session later.
The Economist Service, Economist Service Scholarship and MTI - Economist Service Awards
16. To support our economy-building efforts, an important enabler is to have a pool of highly-capable economists in the public sector who can provide robust economic analyses that help to improve the design and effectiveness of our policies. Indeed, it was with this objective in mind that the Economist Service was established in 2001 as a professional scheme to deepen public sector capabilities in the economic analysis of public policies.
17. I would like to take this opportunity to congratulate the Economist Service on its 20th anniversary this year. Over the past two decades, it has played an integral role in sharpening the quality of our policy analysis and formulation. Today, the Service has close to 100 officers who are deployed across more than 20 Government agencies. To all our economists – thank you for your hard work. Your analyses over the years have certainly helped to inform policy formulation across both the economic and social domains. I look forward to more contributions from you in the years ahead.
18. At this afternoon’s dialogue, we are also presenting scholarships and awards to our economists of the future. The Economist Service Scholarship is awarded to promising young talent entering university who wish to become public sector economists. We also have the MTI Economist Service Awards to recognise the outstanding academic achievements of the top Economics students in NUS, NTU and SMU. My heartiest congratulations to all our scholarship recipients and award winners.
19. I look forward to an engaging dialogue with all of you today.
20. Thank you.