• 2016 Fiscal Year
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  • 2016 Fiscal Year


2016 year in review: Economic highs and lows
15 December 2016

Highly dependent on exporting and trade, Singapore faces much uncertainty after Brexit, and the results of the US election.

Already, Singapore’s expected economic growth
for the final quarter of 2016 has been reduced,
from 1-2% to 1-1.5%. 1

Here's how both global and local affairs have thus far affected the economy and are shaping the future economy.

Brexit

Immediately after the Brexit results were announced, the Singapore dollar weakened against the US dollar. Fortunately, the dip was short-lived, but what happens once the UK actually starts to withdraw from the EU remains to be seen.

 

So far, institutions like the Singapore Ministry of Trade and Industry (MTI) and the World Bank foresee Brexit's impact on the local economy being minimal. According to the World Bank, "The UK accounts for less than 2 per cent of total exports across most of developing East Asia and Pacific"2, limiting the risk Singapore faces from Brexit.

 

However Finance Minister Tharman Shanmugaratnam urges local businesses to remain cautious:

"If a European slowdown coincides with other factors, such as a sharper than expected slowdown in China or the US, we will see a more major impact on our economy" 3.
U.S election

As a trade-intensive country, Singapore has put a lot of effort into the Trans Pacific Partnership. The partnership has been a six year work in progress between Singapore and 11 other nations, including the US. These countries account for 30% of Singapore’s goods trades and 30% of foreign direct investment.

 

As the TPP moved to remove export duties, local businesses stood to save on exporting costs.

 

The TPP was also set to open more doors for SMEs, creating new opportunities and "enhancing the participation of micro, small- and medium-sized enterprises in regional supply chains".

 

However, since US President Elect Donald Trump has voiced his opposition to the TPP, chances of it being passed have slimmed considerably. Trump has been vocal on his opposition to free trade, and vows to drop out of the partnership once he takes office.

 

Nonetheless, Singapore simply sees this as a road block. PM Lee announced that Singapore and several other members of the partnership aim to "press ahead with this agreement independently of what Washington decides". Although the agreement would be much smoother with support from the US, it looks as though Singapore is still prepared to see it through.

The TPP was also set to open more doors for SMEs, creating new opportunities and "enhancing the participation of micro, small- and medium-sized enterprises in regional supply chains"4.

 

However, since US President Elect Donald Trump has voiced his opposition to the TPP, chances of it being passed have slimmed considerably. Trump has been vocal on his opposition to free trade, and vows to drop out of the partnership once he takes office.

 

Nonetheless, Singapore simply sees this as a road block. PM Lee announced that Singapore and several other members of the partnership aim to "press ahead with this agreement independently of what Washington decides"5. Although the agreement would be much smoother with support from the US, it looks as though Singapore is still prepared to see it through.

Budget 2016

On a more positive note, this year's Budget 2016 saw the improvement of existing schemes, and the introduction of new ones. The brand new SME Working Capital Loan Scheme, for example, allows SMEs to loan up to $300,000, with the government taking on 50% of the default risk. Also introduced this year, the Automation Support Package (ASP) will help small businesses increase productivity with more automation, a must in this digital age.

Pokemon Go

Hard as it might be to believe, a game based on a 1990s franchise took the world by storm this year, and shook up the regional economy. In Japan, businesses like McDonald’s, TV Tokyo and even the Bank of Kyoto saw increases in shares and revenue6. Although the Pokemon fever has died down, the game remains one of the top mobile games in the world7.

More importantly, it serves as an indicator of things to come. CNN's Danny Cevallos suggests that augmented reality (AR) could be the next boom:

"The controller of an augmented reality landscape has that power …to spend money, to make economic decisions with real consequences." 8

With the viral game illustrating the huge potential of AR, experts even predict that this technology could be the centre of the next productivity boost9.

Looking forward

Despite the many challenges ahead, rest assured that Singapore is well-equipped to tide the storm. With new additions like the Jurong Innovation District already planned and in motion, local SMEs have the tools to continue to grow, innovate and stay competitive.


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