[SINGAPORE] Having lived and worked in Asia for much of my life, I am very grateful to the United States – the world’s pre-eminent superpower.
US intervention helped end World War II in Asia. The US was instrumental in rebuilding Japan post-war and in pushing back against the forces of communism. It championed multilateral organisations, such as the United Nations, and free trade. All this enabled a small nation with an open economy such as Singapore to prosper.
For much of my working life, which started in 1993, economic growth globally and in Asia was turbocharged by China’s rapid economic expansion. And the US was indispensable in China’s rise. The American consumer bought lots of goods from China, helping it to become the global manufacturing powerhouse and export its way to growing prosperity.
Make America great again
President Trump’s imposition of tariffs on a wide range of imports into the US, coupled with the escalation of the US-China trade conflict, will hurt the global economy and imperil economic growth, as well as jobs in many countries.
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I think the change in how the US engages with the world, and the impact on its economic supremacy, may last well beyond the current Trump administration.
Think about it. The country boasts the world’s most dynamic companies. It is the only country with a large population that is rich.
Based on the International Monetary Fund’s estimate, gross domestic product per capita of the US in 2025 is 6.5, 17.1 and 30.5 times that of populous China, Indonesia and India, respectively.
Also, its GDP per capita is 1.5 and 1.7 times that of mid-sized developed countries Germany and the UK, respectively.
Notwithstanding near-term transition pains and damage to the economy, a big and wealthy country such as the US, which is blessed with natural resources, can probably still do fine even if it largely closes its doors to the rest of the world.
The American consumer loses out when the US imposes tariffs on goods that other countries sell to it. However, the raising of trade barriers may cause even more damage to the wider world.
Emerging countries will find it tough to export their way to prosperity. China, with its economic growth constrained by growing hostility with the US, will be hampered in driving the economies of other Asian nations.
Meanwhile, an America that is less keen to guarantee security beyond its borders will push various allies to up their spending on defence, thus straining already strained fiscal positions in many cases.
As multilateralism weakens, nations that have thrived by relying on such frameworks, such as Singapore, will find the going much tougher.
Nonetheless, while the change in American global leadership hurts Singapore’s economy, there are reasons for optimism on the local economy over the longer term.
As the American tailwind becomes a headwind, investors might prosper over the long run by betting on Singapore’s continued economic prosperity. If Singapore and Singaporeans grow even wealthier, local property as well as equities of entities that rely on serving the Singapore market will do fine.
Singapore’s exceptionalism
There are numerous reasons for optimism over Singapore’s economic prospects.
One, Singapore can continue to prosper by being a connector and useful to the rest of the world. The Republic enjoys strong ties with both the US and China. It has pragmatically built deep relationships with many developed and developing nations.
The country’s sharing of know-how in numerous areas where it is seen as a role model can be valuable to many emerging countries. Also, various Singapore government agencies have tentacles in diverse parts of the world to help push the country’s interests.
In short, Singapore can survive by building strong bilateral relationships all across the globe.
Two, while Singapore’s land mass is small, its location is strategic. It sits in an area where growth prospects look favourable – as long as economic problems caused by US tariffs do not lead to social strife in South-east Asian nations.
Asean, comprising 10 South-east Asian countries, has economic heft. And demographics in some Asean countries are encouraging.
As the rules of global trade change, neighbouring countries need to enhance cooperation. Singapore could benefit from greater Asean economic integration and stronger ties with neighbours, as shown by the development of the Johor-Singapore Special Economic Zone.
Three, Singapore is rare in being fiscally strong. Thus, it can spend to future-proof itself, such as by investing to mitigate the effects of climate change and to secure electricity security.
Continued investments can also be made to improve public infrastructure, boosting Singapore’s attractiveness as a place to live, work and play. Moreover, there are ample reserves to draw on in times of crisis.
Importantly, the country’s fiscal strength underpins a strong Singapore dollar, which makes Singapore dollar-denominated investments appealing.
Four, nurturing and retaining local talent as well as drawing foreign talent will keep Singapore’s economy competitive in a knowledge-based economy.
Singapore has a strong education system that offers multiple pathways to develop students with diverse interests and abilities. As jobs face much disruption from the growth of artificial intelligence and changing consumer trends, substantial investments are being made to retrain and upskill workers here.
Meanwhile, Singapore’s sophisticated economy and conducive living environment will draw top talent, whether local or foreign, to build careers and lives here.
Five, Singapore’s social cohesion and stability will likely enjoy a growing premium in a more troubled world. Businesses from diverse sectors could find the country a safe place to make investments with long time horizons.
Concurrently, wealthy people could be drawn to have more funds invested in and managed out of the Republic. All this bodes well for Singapore’s growth as a wealth management centre and help boost liquidity in Singapore-dollar denominated investments.
While the world is in flux, the country offers certainty in pragmatic policymaking and in addressing long-term challenges. Ultimately, investors may do fine banking on the city-state’s exceptionalism and buying high-quality Singapore-listed equities and local property.
