Prime Minister Lee Hsien Loong announced on Sunday (May 1) that Singapore could experience a recession within the next two years, particularly due to the ongoing war in Ukraine.
“At the start of the year, we were cautiously optimistic about our post-Covid recovery. But the outlook has clouded,” said Mr Lee to unionists at Downtown East and those who attended the May Day Rally.
He admitted that the country is emerging from the pandemic into a world that has not only been altered by Covid-19 but faces significant global security challenges.
“We can feel the headwinds, even as we sense new opportunities opening up,” he noted in a Facebook post on Sunday. He added that the “global headwinds” set Singapore back by S$8 billion a year.
Referring to Russia’s invasion of Ukraine, Mr Lee said there is “no good outcome in sight” and that the fighting would likely drag on for “quite a while longer.”
“The longer the war continues, the greater the risk of the conflict escalating,” he said.
No one will be able to control how the situation unfolds if the war spreads beyond Ukraine’s borders or unconventional weapons are used, he noted.
Meanwhile, Singapore feels the impact of the war on the cost of living, with worsening inflation.
With Russia being a major exporter of commodities such as oil, gas, vegetable oils and cereal crops, the invasion has resulted in a worldwide energy crunch and rising food prices.
“The government is doing all it can to cushion the impact of Singaporeans and alleviate the cost-of-living pressures,” said Mr Lee.
However, “Singapore is tightly integrated into the global economy and given our small size, we will always be a price taker in world markets, so we cannot avoid these global headwinds,” he explained.
The Ministry of Trade and Industry has estimated the country to be hit by about S$8 billion per year, or 1.5 per cent of Gross Domestic Product.
“That means we in Singapore have become collectively S$8 billion poorer off per year, and there is no escape from this,” said Mr Lee.
Although government support schemes will help share the burden and cushion the effects on households, “this does not really solve our problem” in the long term, said Mr Lee.
The fundamental issue lies in the higher energy and food prices; therefore, the country must be more productive.
“The imperative for businesses and workforce transformation has never been stronger. We need to continually reinvent ourselves to maintain our place in the world,” he said.
“Our tripartite partnership has helped us overcome many past crises. Having fought Covid-19 together, we can be confident of overcoming future challenges and making the most of opportunities that come our way,” said Mr Lee, ending his Facebook post. /TISG