Singapore’s Leader Says Economic Rebound Depends on Global Calm

(Bloomberg) -- Singapore Prime Minister Lee Hsien Loong said the city state’s economy could improve in 2020 only if any number of global risks don’t materialize, particularly emanating from the U.S.

Lee said in an interview with Bloomberg’s Editor-in-Chief John Micklethwait that he’s “relieved” that Singapore’s economy escaped recession in 2019. The government’s growth forecast for this year -- anywhere from 0.5%-2.5% -- indicates “we really don’t know” how things will pan out, he said.

“That’s the range of what our economy is capable of, but whether we realize that capability, that potential, depends on international conditions,” Lee said on the sidelines of the World Economic Forum’s annual gathering in Davos, Switzerland. “If there’s a blowout between China and America, or if there’s something happening in the Middle East, either with Iran or with Syria, then all bets are off.”

Singapore is poised to rebound from 2019, when a potent mix of trade-war disruption and an electronics-cycle slowdown pulled growth in the export-reliant economy to its weakest level in a decade. There have been some recent signs of recovery: the December purchasing managers index signaled an expansion in factory output after seven straight months of contraction, while exports gained for the first time in 10 months.

“The electronics cycle seems to be turning, which is an important part of our manufacturing industry,” Lee said. “But it depends on the global economy, and particularly on the U.S.”

Lee, 67, said U.S. growth has been better than many had expected, noting comments from U.S. President Donald Trump in Davos earlier this week that the economy is “marvelous.” Lee warned, though, that it wasn’t clear whether imbalances might build up, and that it’s “not a negligible chance that you could have a change of direction within a year or two years.”

Singapore’s position among the world’s most trade-reliant economies has left it vulnerable to each twist and turn of the trade war, but Southeast Asia more broadly has seen some benefits as businesses shift their supply chains. Vietnam has been one of the region’s biggest gainers.

Ultimately, businesses will probably opt for a “China-plus-one strategy,” Lee said: maintaining a presence in China as well as other locations, for example in Southeast Asia, India, Bangladesh or East Africa.

Singapore’s gains from these supply-chain moves probably won’t be significant, Lee said, given the limited overlap with China on the kinds of industries that are shifting away from there. However, Singapore sees a unique role for itself as China’s presence in the region continues to grow.

“It could be manufacturing presence, it could be infrastructure, it could be part of their Belt and Road projects,” he said. “We have a role in financing it, in hosting regional headquarters for it, in working with them, providing expertise, making sure that the projects go well.”

--With assistance from Joyce Koh.

To contact the reporter on this story: Michelle Jamrisko in Singapore at mjamrisko@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Michael S. Arnold

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