Despite weakness in economy, Singapore not likely to head into recession in 2023: PM Lee
Janice Lim
[JAKARTA] Singapore will likely not head into a recession in 2023, despite sluggishness in the economy, said Prime Minister Lee Hsien Loong on Thursday (Sep 7).
On Wednesday, private-sector economists downgraded the Republic’s 2023 growth forecasts to 1 per cent, from 1.4 per cent in the previous quarter.
“So for us, 1 per cent is slow. But it’s not a recession. And we’ll have to see how things go in Europe, in America, and also in China. And I think all in, there’s some sluggishness in the economy. We don’t think that we are going into a recession this year,” said PM Lee in an interview with local media following the conclusion of the 43rd Asean Summit in Jakarta, Indonesia.
“But what happens next year, we’re not sure yet.”
Given that Singapore is a developed economy, economic growth would most likely top 3 per cent in a year with very strong performance. The exception is the rebound after restrictions eased from the Covid-19 pandemic, which saw growth rates breach 4 per cent. PM Lee noted that such a high rate of growth is transient and not sustainable.
While economies of the Association of Southeast Asian Nations (Asean) are also showing signs of weakness, PM Lee said the region still remains a bright spot amid a slowdown in the global economy.
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Noting that the world economy is currently “not that vibrant”, projections that the Asean economy as a whole would grow between 4 per cent and 5 per cent in 2023 are considered “not bad”.
Concerns over a slowdown in Asean’s economy came after some economic indicators were released. Thailand’s central bank recently revised down its economic growth and inflation forecasts, while Vietnam’s exports for August fell.
The current weakness in Asean’s economy is partly a result of the economic slowdown in China, which is the region’s biggest trading partner. While the world’s second-largest economy grew 6.3 per cent in the second quarter of 2023, this was well below economists’ expectations of 7.3 per cent growth.
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The US also recently revised down its economic growth for the second quarter of 2023 to 2.1 per cent, compared to its previous estimate of 2.4 per cent.
The energy and traditional services sector, such as retail and tourism, in Asean economies may go through cycles of growth and weakness.
However, PM Lee noted that the digital economy in this region is “quite vibrant”.
“So I wouldn’t worry too much about the transients. I think what you need to do is to enhance our capabilities, our competitiveness and our cooperation, so that whatever the environment, we can do better for our people. And that’s what Asean is trying to do,” he said.
Just days before the summit, economic ministers from the bloc launched negotiations on a framework for the region’s digital economy. Digital trade, cross-border e-commerce and digital payments are some of the areas to be covered in the negotiations.
Discussions on the digital economy is one example of the progress that has been achieved after three days of intense meetings with leaders within the grouping, as well as its external partners.
PM Lee also cited work towards developing a vision for Asean in 2045, as well as discussions on green economy cooperation as other instances of how the bloc is strengthening its ties.
The Asean outlook on the Indo-Pacific, an initiative that lays out the bloc’s common position on regional cooperation, security and prosperity, has also been endorsed by its external partners, including China, Japan and South Korea.
“How do we think about our cooperation with the Indo-Pacific, to make it inclusive, to make it omni-directional, to make it win-win, to make sure it’s rules-based? Other countries, other groupings also talk about the Indo-Pacific, but each one means something slightly different. So this is the Asean flavour,” he said.
On the Myanmar crisis, the bloc has set up a new mechanism where the immediate past, current and incoming chairs of Asean would work together to reach a resolution. Thus far, Asean has referred to the five-point consensus as the main guiding principle to resolve the ongoing violence in Myanmar, which returned to military rule after a coup in February 2021.
While PM Lee said that nothing will “immediately change the situation in Myanmar”, this new mechanism establishes a grouping that ensures some continuity and renewal as the chairmanship of Asean changes every year.
Asean chairmanship works on a rotating basis among its 10 members, and the group’s leaders decided to pass over Myanmar’s turn to take up chairmanship in 2026. Taking Myanmar’s place that year will be the Philippines.
By having the immediate past, present and future chair work as a collective group to engage with parties in Myanmar, PM Lee said this makes the bloc’s engagement more effective.
“Because the reporting back to Asean members will be more systematic, and the engagement with three members, hopefully more can be done. That part will definitely make a difference,” he added.
“As for how it will be able to stop the violence, to cause solutions to be worked out, to cause humanitarian aid to flow better, those are consequential results, which we hope with better engagement in due course, that will come about. But I think it will take time.”
The relevance of the grouping has been called into question by critics over its inability to forge a resolution, as the junta has shown no desire to implement the five-point consensus.
However, PM Lee said that Asean is about “accumulating patient work”, in the form of having several discussions on issues that are of concern to the region, as well as on areas that have potential for growth and partnership. Meetings also revolve around enhancing cooperation and formulating substantive agreements, stances and policies.
It is through this patient work that Asean makes a difference. “You don’t have single spectacular sexy things, but you will have multiple patient positive things,” he said.
Without Asean, there will not be a forum for leaders from the US, China, Japan or India to engage with leaders from South-east Asian countries.
“People from all over the world come and they meet us, and they won’t do that to come to Singapore. They won’t even necessarily do that to come to bigger members of Asean. But because there is Asean, every year, we have this forum, and it’s very valuable to us,” PM Lee said.
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