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Size doesn't quite matter any more

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From left: Mr O'Sullivan, Mr Salmond, Mrs Lim and David Skilling, director, Landfall Strategy Group, at the Credit Suisse conference on Thursday. Mr Salmond says that the traditional disadvantages of small countries - a lack of security and a hinterland - have largely disappeared, and this has allowed for new advantages to emerge.

SMALL countries tend to have more resilient and open economies compared to their larger peers as they are more exposed to changes in the global economy. This has resulted in smaller nations such as Singapore and Switzerland generally performing better economically than big countries.

This was the conclusion of a Credit Suisse report, The success of small countries and markets. The report noted that small countries provide an indication of the future for large countries, and act as a test bed for what works and what doesn't. For instance, New Zealand and Norway are already registering the side effects of slower growth in China, while the social costs of austerity is evident in Ireland and Portugal.

"Small countries are canaries in a coal mine. You will see it in countries like Singapore where new trends and the ebb and flow of the global economic cycle is picked up more quickly that in bigger countries like China or the US," said Michael O'Sullivan, Credit Suisse chief investment officer for the UK & EMEA, private banking & wealth management.

One of the authors of the report, he was speaking during a panel session exploring the success of small countries at the Credit Suisse Global Megatrends Conference 2016 on Thursday.

Another panellist, former first minister of Scotland Alex Salmond, said that the traditional disadvantages of small countries - a lack of security and a hinterland - have largely disappeared, and this has allowed for new advantages to emerge.

"By and large, now you can be a small country and have security and not be taken over by a larger country. It doesn't mean that they will automatically succeed, but there seems to be an advantage in terms of what these countries are able to do economically," he said.

Speaking about Singapore's experience, former second minister for finance and transport Lim Hwee Hua said that the government's policymaking has had to take into account the Republic's small domestic market and its lack of a hinterland.

"Our businesses generally have to internationalise at a much earlier stage of the growth cycle compared to their peers anywhere else in the world. This puts a lot of pressure on businesses here in Singapore," said Mrs Lim, who is a director and a member of the investment committee of Tembusu Partners.

The Credit Suisse report also tied small countries' macro performance to the performance of their capital markets. It found that in the long term, small-developed country equity markets have outperformed large country ones. The same is true, though to a lesser extent, for small-developed country bond markets.

"The trends likely reflect the higher level of growth attained by small countries throughout this period of globalisation," the report said.

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