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'Modest' direct impact of Brexit on Singapore economy in medium to long-term: MTI
SINGAPORE sees the direct impact of the United Kingdom leaving the European Union (EU) on its trade-reliant economy as being "modest" in the medium to long-term.
This assessment, made by the Ministry of Trade and Industry (MTI) in response to queries from The Business Times, adds to recent ones made similarly by Singapore government agencies and officials.
Polling stations are now open in the UK for a referendum on whether Britain should stay or leave the EU. The latter outcome is often termed as "Brexit".
"Based on analysts' current ballpark estimates of the impact of Brexit on the UK and the eurozone economies, MTI's assessment is that the medium to long-term direct impact of Brexit on the Singapore economy is likely to be modest," said an MTI spokesman on Thursday.
"Given the unprecedented nature of Brexit, its full impact on the UK, the EU or the global economy will be heavily dependent on the UK's subsequent trade arrangements with the EU and other markets."
This comes after the Monetary Authority of Singapore (MAS) said that it is monitoring the developments closely. "Singapore's banking system remains sound and resilient, with strong capital and liquidity buffers to withstand shocks," said an MAS spokesman.
In an earlier Reuters interview, Singapore's Trade Minister Lim Hng Kiang said that he and fellow officials had been following closely developments.
Brexit is "definitely not a positive development when you talk about global economic recovery", he said.
However, opinion polls, while not absolutely accurate, have also shown in recent days a preference for a "Remain" vote. Some observers thus predict a one-quarter to one-third probability of the UK leaving. Markets and the British pound have thus rallied these past few days.
A "Leave" outcome therefore will surely upset markets. Some are even drawing parallels between the fallout from a Brexit with that of the Lehman Brothers bankruptcy in 2008.
While economists BT spoke to agreed that a Brexit will not severely impact Singapore in the medium to long-term, they added that such an event is unprecedented, and will have an effect on global and business confidence.
Brexit will have limited direct impact on Singapore, said Jeff Ng, economist at Standard Chartered. However, the indirect impact on global confidence and on the major economies could be greater.
As a result, "Singapore will be more susceptible compared to other Asia economies, due its trade openness". "Market variables such as the Singapore dollar may be more impacted from a sharp fall in pound strength," he said.
Said CIMB Private Banking economist Song Seng Wun: "Uncertainty may cause a change in consumer behaviour, businesses may thus stand on the spot waiting for clearer outcomes, global trade will then be affected."
Voting is set to close at 10pm on Thursday in the UK, or Friday 5am in Singapore. No exit polls will be conducted.
First indications of which way the outcome will swing towards may come at about 5am on Friday in the UK, according to British media. That will be at around noon on Friday in Singapore.