How will Singapore react to the rise of protectionism?

Zak Goldberg
protectionism amid a global ecosystem

What does the future hold for open economies amid an increasingly uncertain new world order?

There is no doubt about it. The global, political landscape has endured a seismic shift during the course of the last 15 months. While events such as Brexit and the election of Donald Trump as U.S. President may have embodied the rise of populism, however, they also represent a shift towards protectionist policies and the decline of globalisation.

Along with the rapid pace of technological advancement, this has created a volatile climate, and one that has the potential to create both challenges and opportunities for economies with a desire to reposition themselves in the new, world order.

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Take Singapore, for example, which recently pledged to take decisive action to address the shifting economic climate, highlighting its plans during February’s recent budget announcement.

The challenge facing Singapore: A global nation in an increasingly protectionist world

This announcement discussed the global and political challenges at hand in depth, while also outlining its revenue and expenditure for the financial year 2017-18. During this period, Singapore is expected to see an overall surplus of S$1.9 billion (US$1.36 billion), although it will remain particularly vulnerable to any sudden slowdown or decline in global trade. The nation’s ageing population is also providing cause for concern, as this could impede growth in an increasingly digital and technology-driven economy.

Make no mistake, however. The primary challenge remains to be Singapore’s openness, with the nation having played a key role in the globalisation that took place prior to the recent shift. This has caused the government to act, particularly with further elections in France and Germany this year having the potential to continue the trend for protectionism and trigger an initial break-up of the European Union.

In simple terms, Singapore has promised to extend assistance to sectors that may suffer from an immediate downturn in global trading volumes, including marine, offshore energy, and construction. National firms will also be offered targeted reliefs through increased, corporate tax rebates, which may offset any initial losses that are caused by protectionism.

While some experts have suggested that the government could do more still to help businesses manage their costs over a sustained period of time, the recent accoutrement represents a good start and a positive response to the recent political shifts.

While Singapore’s budget announcement seems to provide reassurance for business owners, however, the question that remains is this: How are the recent changes likely to impact on financial market traders? Although the use of mobile trading tools such as the mt4 may make it easier for traders to adapt to a rapidly changing and volatile economic climate, it may be necessary for some to change their overall strategy and diversify their interests overseas.

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This is certainly the case for forex traders, as this market continues to depreciate as major currencies such as the Euro (EUR) and the pound (GBP) continue to operate in narrow trading ranges.

The bottom line

The need for change is prevalent across the globe, and this is evident when you look at the typical GDP outlook for developed economies. Most have seen their annual growth decelerate to around 1 per cent or lower, which is well below the desired target of between 2 to 3 per cent. This trend applies to Singapore too, so the nation’s government is already focused on amending its strategy to drive growth, productivity and greater efficiency.

In the case of Singapore and other nations with a global outlook, however, the need for change is even more pressing. Without addressing the shift towards protectionism and the likelihood that this trend will continue further in the near-term, nations such as Singapore would run the series risk of losing their place and their status in a new and uncertain world order.

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