Second Minister S Iswaran's reply to Parliament Questions on whether the worsening euro zone debt crisis affecting S'pore

​Question

Dr Lily Neo: To ask the Minister for Trade and Industry (a) whether the worsening euro zone debt crisis and woes of the global economies are affecting Singapore and if so, how; and (b) whether there are measures to cushion the repercussions here.

Reply by Mr S Iswaran, Second Minister for Trade and Industry

1. The sovereign debt crisis situation in Europe remains worrying. While the immediate risk of Greece exiting the Eurozone has receded following the formation of a pro-Euro coalition government that supports the bailout programme, concerns over its medium term fiscal sustainability and ability to stay in the Eurozone persist. In addition, there are uncertainties as to whether Italy and Spain, the third- and fourth- largest economies in Europe, would require full-scale bailouts. A key challenge would be for Eurozone economies to muster the political will to put together an effective intervention package. Against this backdrop, the Eurozone economies will remain weak, as ongoing fiscal austerity and bank deleveraging continue to dampen domestic demand in the region.

2.     Economic growth momentum has also slowed in the US and China. The pace of recovery in the US labour market has weakened in recent months, weighing down on consumer demand. In China, economic growth has moderated on the back of sluggish external demand. Nevertheless, the recent accommodative policy measures announced by these countries would provide some support to their growth.  3. The slowdown in these major economies has affected our exports to some extent. Singapore’s total non-oil domestic exports (NODX) growth has slowed from 6.1% in the first quarter of 2012, to 2.5% for the first two months of the second quarter (viz April and May). In particular, our NODX to the US and EU for the two months in the second quarter contracted compared to a year ago, while the NODX to China grew at a slower pace.

4. However, there is no immediate need for government to step in with measures to cushion the economy from the slowdown in external demand. Singapore’s labour market remains tight, with healthy employment creation and a low unemployment rate. Our NODX to regional trading partners, such as Indonesia and South Korea, continue to expand at a brisk pace, due to their resilient domestic demand. Supported by these factors, we still expect the Singapore economy to register positive growth of 1 to 3 per cent this year.

5. Nonetheless, as the situation in Europe and the global economy remains challenging and fluid, the government will continue to keep a close watch on developments and stands ready to respond when appropriate.