Singapore ‘needs to stay at the edge of technology’: INSEAD economist Antonio Fatas says

SINGAPORE: As global trade tensions drag into 2025 and look set to endure, Singapore faces a strategic test. It needs to stay competitive while the world rewires supply chains around US-China frictions, nearshoring, and economic nationalism.

Professor Antonio Fatas, a macroeconomist at INSEAD Singapore, says uncertainty still dominates boardroom planning — and Singapore must continue to differentiate through tech, talent, and being open to the world.

He explains: “There is still uncertainty about the final deal between the US and China. But in most scenarios, China will face high tariffs when selling to the US, and those exports will either have to go somewhere else (pressure on other countries to import more from China) or be rerouted via other countries.”

However, Fatas notes that simply rerouting the same goods from other countries, or engaging in some form of transhipment, will not be as simple going forward. This is due to how the US can step up enforcement and simply not permit such goods to reach the US and bypass tariffs. Additionally, across regions, such tariffs can be on par.

“In summary, a lot of uncertainty ahead, while companies might want to optimise their production locations, there is still much to be known to make a final call”, he concludes.

Supply chain shifts & economic nationalism

Even as multinational corporations (MNCs) reconfigure their China-exposed supply chains, no one should expect this to bring factories to Singapore amid the supply chain reconfiguration.

Fatas elaborates: “Moving production to Singapore from China is not obvious because of the lack of scale. There is no significant labour force to attract many of these sectors, plus the cost of labour and other costs in Singapore.”

Headquarters or coordination roles may flow to the city-state for different reasons. But in the element of sheer industrial scale? Singapore will simply not be positioned to win.

As for the rise of tariffs globally? Fatas notes the need for some agility, rather than approaching the matter with alarm. He explains: “The biggest issue here is uncertainty; we still do not know how this will end, so one needs flexibility at this point. Apart from that, the effects might not be as large as some fear.”

“Everyone is facing tariffs; this is not just an attack on one country. Of course doing business internationally has become more expensive to trade in general will suffer but the effects could be small (even if negative),” he adds.

Bet on tech, not finance

Where Singapore’s advantage lies is in high-value, innovation-driven industries. Fatas says, “Sectors that can find a home in Singapore will benefit more. Sectors where labour costs are less relevant and where technology is central.”

This aligns with the government’s push in semiconductors, biotech, and advanced manufacturing.

As for its much vaunted financial services sector? “I am not sure the financial sector is, per se, a sector that will benefit from the current environment. Yes, changes to other sectors will represent opportunities to finance, but nothing that I think will be significant”, he opines.

The current trade volatility seen worldwide does not necessarily translate into outsized gains for banks.

Europe’s lesson

Asked about Europe’s own stagnation and the lessons Singapore can draw from its major economic partner, Fatas highlights productivity and demographics as key constraints.

He elaborates: “Europe is not growing because of demographics and limited productivity growth. Singapore faces the same two potential challenges. The population is ageing, and without the engine of migration, Singapore will see its growth rate slow down. In addition, Singapore cannot grow out of catching up with other countries, as it is a rich country. It needs to stay at the edge of technology, not always easy in a small economy.”

His view of Singapore’s strength? Fiscal strength and openness. He argues, “Singapore needs immigration to counteract demographic trends… Singapore does not have the government debt burden that Europe has.”

Business cycles & US focus

Weighing in on the matter of the global business cycle, Fatas notes that the global economy has already achieved its soft landing. He shares: “Soft landing was achieved in 2022-2023. We are not asking the question of when the next recession will happen.”

With Singapore lacking any meaningful way to influence global conditions, he points out, “All uncertainty is in the US. If the US enters a recession, Singapore is likely to see growth rates decreasing.”

And in any downturn, Fatas reckons Singapore has to focus on resilience and protecting its citizens, rather than attempting reinvention in a time of turmoil. He notes: “Recessions do not create more opportunities for certain sectors; they affect some sectors more (volatile sectors such as durable goods). They crash faster, and they recover faster.

At this stage, Singapore cannot rely on past catch-up growth. Rather, Fatas sees it needing to be at the very edges of the tech frontier. And this remains an enduring challenge for the city-state, despite the success of countries like Israel with cybersecurity or Luxembourg with its space technology.

For policymakers and boardrooms in Singapore? The message is consistent: immigration, innovation, and agility remain non-negotiable.