Daily Management Review

Credit Suisse: Singapore is losing export potential


08/29/2016


Singapore is losing its export competitiveness to other Asian economies - Vietnam, the Philippines and China. This conclusion is contained in a report released by Swiss bank Credit Suisse.



"Rising cost of production" is called one of the main reasons for decline in Singapore's export potential. "The Republic, which economy is largely dependent on foreign trade, is losing its share of the world market, and, according to forecasts, this trend will continue in the coming years", - stated the report.

The bank’s experts also point out that, "in spite of the low rate of production growth, wages in Singapore continue to increase, which leads to a rise in the cost of labor and, consequently, a reduction in corporate profits." In addition, named negative factors include government policies aimed at tightening requirements for attracting foreign labor force, analysts said. Thanks to this "capital investments are falling, and various studies have shown interest in Singapore decreasing among foreign investors." 

According to the country’s Association of International Companies, volume of non-oil domestic exports (NODX) - a key indicator of the Republic's foreign trade - fell by 10.6% in July, which was much worse than previously voiced predictions. In addition, preliminary estimates for the year show that NODX could decline by 3-4% in total. Meanwhile, Vietnam's foreign trade since 2010 has increased annually by 12-14%.

Previously, Central Bank of Singapore released a report. The organization said growth of Singapore's economy is expected to further slow down due to negative global economic environment, yet there’s no risk of depression.

Since October last year, the global economy has deteriorated again. In particular, pace of US economic growth was slower than expected, Euro Zone and Japan's economy were exposed to revaluation of their currencies and weakening of external demand. Many sectors of the Singaporean industry, especially the service sector, feel under influence of these factors since the beginning of 2016. In this regard, Singapore's economic growth will certainly slow down, the total figure in 2016 will be 1-3 percent.

The Central Bank also stated that level of Singapore's key inflation in 2016 will remain at a low level of 0.5-1.5 percent. Headline inflation will remain at around -1-0 percent (- 0, 5 percent in 2015).

"Everything is made for convenience in Singapore, - said an employee of International Market Assessment analytical bureau Richard Martin. In addition, this place is ideal to monitor situation in the Asian markets."

However, any utopia has its own disadvantages. Cost of living in Singapore continues to grow incredibly fast, especially compared with neighboring Indonesia and Malaysia.

In 2015, the city was recognized as the most expensive in the world (according the Economist). The city is like a magnet for foreign specialists, especially in the field of marketing, finance, information technology, communications, transportation, engineering and advertising.

The city hosts offices of many major corporations such as Microsoft, American Express, Bain & Co, Gunvor Group, Capital Land, DBS Bank, BBDO, McCann-Erickson and Edelman. Singapore is also home for Southeast Asian bureaus of the most popular and influential media - BBC, BBC, ESPN, Discovery, Asian Food Channel.

source: theindependent.sg, bbc.co.uk






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