‘A severe slowdown could test PAP leadership’
With the approach of the New Year, middle class Singapore is becoming increasingly nervous about what is coming around the corner.
The economy has suddenly turned grim not only for the coming year, but also several years after that.
But true to tradition, young Singaporeans will probably ring in the parties with revelling and splurging, at least until reality dawns.
Behind the lights, however, the heartland is concerned about the coming global crunch that will likely hit Singapore harder than its Southeast Asian neighbours.
This city, more than others, is a trading and financial centre, and its prosperity rests with the broad middle class being gainfully employed.
Those who have deeper retrenchment worries are Singapore's professionals, managers, executives and technicians, who form the backbone of Singapore's broad middle class.
With an army of lower-paid peers from developing countries ready to work for less, they could be among the first to go, depending on sympathetic, responsible employers.
For weeks now the government has been warning the 5.18 million residents to prepare for a prolonged slowdown.
And last week a minister of state surprised Singaporeans when he told them to get used to a weaker economy in the next 10 years. In other words, the troubles were more long-term than just cyclical.
Possible impact on PAP
Any prolonged weakness will not augur well for the ruling People's Action Party (PAP), which just suffered its worst election setback in May.
The PAP has stayed in power for 46 years because it was able to take care of Singaporeans.
The "severe slowdown" on the horizon could test the leadership of the PAP government and trade unions, said Deputy Prime Minister Tharman Shanmugaratnam.
"We have to prepare for the possibility, the very real possibility, of rough times ahead, a severe slowdown in the global economy," said Tharman, who is also Finance Minister.
In the event of a recession — the third in 12 years — it will be the first without the presence of former prime minister Lee Kuan Yew in the Cabinet.
The New Year could bring a double whammy — a slowdown during a high inflation that could exceed 5 per cent.
The real test for the political leaders is not whether Prime Minister Lee Hsien Loong can eventually restore Singapore's economic health. He can when the world recovers.
The question is how badly Singaporean assets and jobs will be affected by the recession.
Another issue is whether the crisis will result in a wider income gap, with the poor in worse condition than before.
"Will it render society less cohesive?" one commentator asked.
Several neighbouring countries whose interests are intertwined are watching when it will end. What will happen to Singapore's open door immigration policies?
The Republic has long been the region's top supplier of jobs for nationals of about half a dozen countries.
In the event of retrenchments — as had happened in 2008 — they will severely curtail inflow, but will deliver a blow to the aspirations of tens or thousands of foreigners, including fresh graduates, who seek better paying jobs here.
"It is fingernail-biting time for families scattered all over China, India, the Philippines and Malaysia who have relatives working or seeking to work here," said a financial analyst.
Caution advised
Secondly, Singapore has long been an exporter of capital and investment in the region, and several developing countries have come to depend on it as a catalyst of growth.
As the year draws to a close, the government has increased its advice to citizens to be vigilant when buying stocks and properties, warning of market instability.
They could end up losing a lot of money, said an analyst in a government-linked corporation. A number of speculators have recently been badly burned.
One by one, the political leaders have warned Singaporeans to expect more retrenchments, lower salaries and bonuses next year as well as in the years ahead.
Two out of three companies have just reported profit declines in the third quarter and Singapore's non-oil export fell by 16 per cent. Electronics dropped by 33 per cent.
Some economists are ruling out a return of the 6-8 per cent growth in the years ahead for several reasons.
Fundamentally, Singapore is facing tougher competition abroad. Whatever it does, others are doing the same or better.
At the same time, the restraint in recruiting more foreign workers in the face of Singaporean objections is said by the government as a cause of the slowdown.
It faces another pressure from voters that it cannot afford to brush aside: take action to close the gap between rich and poor.
"This will result in more spending for a larger safety net for the poorer class," said an economist.
A PAP backbencher explained: "It is quite clear that we are no longer embarking on a growth-at-all-costs policy."
Meanwhile, there is a bit more disquiet in the workers' front.
"I have seen more people scanning the classified pages for jobs," said an Internet commentator.
A former Reuters correspondent and newspaper editor, the writer is now a freelance columnist writing on general trends in Singapore. This post first appeared on his blog www.littlespeck.com on 26 November 2011.