Singapore may be the worse-hit Southeast Asian country in the current economic crisis, but it could well be the first economy in the region to rebound, according to economic forecaster Thierry Apoteker.
A jump in US consumer confidence in November is just one of the indicators that could signal signs of a global recovery next year. Consumer confidence index rose in November to 44.9, up from 38.8 in October which was the lowest on record.
Coupled with signs of liquidity tensions loosening up, it is suggested that banks may start lending to corporations soon which could put the US on a recovery path.
“We have the initial tentative signs that this is taking place. The spreads between money market rates and the fed rates have declined substantially. Not yet to the normal zone but substantial, compared to the rates of 300 basis points that we have seen after the Lehman collapse,” said Dr Apoteker.
Increased spending in the US and Eurozone would translate to an increase in demand for exports from Asia.
And while global trade numbers may pick up, Dr Apoteker expects a slower growth rate of between 4 and 5 per cent, as opposed to the almost 10 per cent growth in 2006.
He added that he expects the US and Eurozone to see signs of recovery in the second quarter of 2009, with Asia following suit in the third quarter.
And although Singapore will be hit by slowing trade, its strong asset base and robust financial sector will boost its economic recovery.
The managing director of TAC said: “Clearly, trade transmission is incredibly strong for Singapore because you are a trading nation by construction, so in that sense there is nothing you can do. There is no policy management that can avoid when the whole demand in the world is collapsing. As a major exporting nation, you are very bluntly, brutally affected, but symmetrically, you will be the first one to come out of it.
“What’s very interesting is that the other transmission mechanism – both on the asset market and the financing mechanism in Singapore – is pretty strong, much stronger than most.
“We’ve done an exercise of mapping the banking systems of all the Asian countries to look at where the strengths and the weaknesses are, and you might be interested to know it is rated 1 to 64 in binary ranking.
“Singapore is the only country, apart from Japan and Korea, to have a number one ranking. The financial background is very strong, so as a trading outpost you will be very badly affected, but you will be the first to recover after that.”
But a recovery in Asia could also depend on what happens in China.
“The very critical question to what happens in Asia is what happens in China because even if we have a mild recovery in the West, a catastrophe in China will impact the rest of Asia very negatively due to the growing integration of Asia and China,” said Dr Apoteker.
He warned that if Chinese companies are unable to export surplus stocks financed on credit, the losses they chalk up could impact their trade with other Asian economies.
But for the moment, the decline in Chinese exports is expected to be short-lived, with the country’s growth rate still expected to come in at 7.5 per cent next year.
Source : Channel NewsAsia – 11 Dec 2008