Singapore: Singapore must brace up for an arduous road ahead with multiple economic challenges such as spiralling inflation and rising energy prices, Prime Minister Lee Hsien Loong warned on Sunday as he urged citizens to stay open and make our economy stronger and more resilient.
The ongoing war in Ukraine, which shows no signs of abating, has undermined the global order, which has hit smaller city-states like Singapore, whose security depended on the international rule of law, Lee said during his May Day address.
As a result of global headwinds driving up energy prices, Singapore will take a hit of SGD 8 billion a year, he added, citing estimates by the Ministry of Trade and Industry.
“That is 1.5 percent of our GDP,” Lee said.
“That means we have become collectively SGD8 billion poorer off per year, and there is no escape from this,” The Straits Times quoted Lee as saying at the rally held to observe Workers’ Day here.
Singapore imports nearly all its supplies of energy, except for the solar electricity that it generates itself.
For example, when the oil price was around USD 50 per barrel, Singapore’s annual imports of crude oil and natural gas cost roughly SGD30 billion per year.
But when oil prices double to USD100 per barrel, as they have done in the last 16 months, Singapore has to pay double too, which means an extra SGD30 billion per year, Lee said.
“We can recover part of this by charging more for our exports. But the rest has to be borne by us – by Singapore households, businesses, and the government,” he explained.
The war has worsened global inflation as Russia is a major exporter of oil and gas, and Ukraine is among the world’s largest exporters of cereal crops and vegetable oils, he noted.
Lee added that the stakes in the crisis are also rising, as the war continues without a positive outcome in sight.
Last week, Singapore’s central bank said that it expects global growth to taper down to 3.9 percent in 2022 from 5.4 percent last year as inflation climbed to a 14-year high.
Inflation was already a problem before Ukraine, but the war has made it worse. The war has caused a worldwide energy crunch and disrupted food supplies, he explained.
Prime Minister Lee said Russia’s attack on Ukraine has undermined the global order: the basic rules and norms for how all countries, big or small, interact with one another.
Amid the war in Ukraine and the rising cost of living, Singaporeans must be prepared for more economic challenges, but the government is doing all it can to cushion the impact on Singaporeans and alleviate the cost-of-living pressures, he asserted.
“If Singaporeans are not strong and united, if we allow ourselves to become split and divided, we will be done for,” Lee observed.
“Singapore’s economy depends heavily on international trade and investments. If countries no longer accept the rules of free trade, that makes it harder for us to continue to attract investments,” the mainstream daily quoted Lee as saying.
“Our strategy must be to stay open and make our economy stronger and more resilient,” he added.
The war in Ukraine has dimmed Singapore’s outlook post-COVID recovery on which it was cautiously optimistic at the start of the year, the premier said.
The city-state has removed travel curbs and moved to pre-pandemic routines. Last month, the government also scrapped tests for incoming vaccinated visitors and limits on gatherings.
Interestingly, Lee’s May Day speech marks his first major national address since the ruling People’s Action Party selected Finance Minister Lawrence Wong to succeed him as the next prime minister.
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