Singapore must prepare for economic challenges, Government doing 'all it can' to cushion impact: PM Lee

SINGAPORE: Amid the war in Ukraine and rising cost of living, Singaporeans must be prepared for more economic challenges, but the Government is “doing all it can to cushion the impact on Singaporeans and alleviate the cost-of-living pressures”, said Prime Minister Lee Hsien Loong on Sunday (May 1). 

Speaking at the May Day Rally, Mr Lee shared several measures that the Government rolled out during this year’s Budget. 

“This year’s Budget ... (contained) many direct measures to help households. U-Save rebates, CDC vouchers, and S&CC rebates; these will reduce out-of-pocket living expenses for nearly all households. Lower- and middle-income households who need more help will get more,” he said. 

“(The Monetary Authority of Singapore) has tightened our monetary policy to reduce imported inflation. That is why the Singapore dollar has appreciated.”

Singapore is also “taking steps to secure our food and energy supplies, just in case supplies are disrupted by the ongoing war”, added Mr Lee. 

Despite the Government’s assistance, “inflation will remain high; central banks in the developed countries are tightening their monetary policies, raising interest rates; global growth will be weaker, and there may be a recession within the next two years”, he said. 

Mr Lee added: “We have to face up to these realities. Singapore is tightly integrated into the global economy. Given our small size, we will always be a price taker in world markets. We have very little bargaining power. If the prices go up, our prices go up. If supplies are short, we are squeezed.

"We cannot avoid these global headwinds.”

SINGAPORE MUST “STAY OPEN” 

Nonetheless, Singapore’s strategy must be "to stay open, and make our economy stronger and more resilient”, said the prime minister. 

Singapore must “keep seizing opportunities for growth, developing new capabilities and becoming a more competitive economy”, he added.  

“Then despite the uncertain climate, despite the pressures against globalisation, investors will still find it worthwhile to put their projects in Singapore, our exports will still find foreign markets, and we can still earn a living for ourselves in the world.” 

Economic success alone is not enough, noted Mr Lee. 

He said: “Our growth must be matched by social and political cohesion. There is war in Europe, there are major troubles in the world, and great power rivalry in the region. Facing all these external troubles, if Singaporeans are not strong and united, if we allow ourselves to become split and divided, we will be done for.”

But Mr Lee acknowledged that there are “limits to what Singapore can do to influence broader international trends”.

“We will push back against deglobalisation. We will speak up to encourage the US and China to constructively engage each other. But ultimately all these matters depend on the major powers themselves, and the relations between them, and how the war in Ukraine unfolds,” he said. 

While larger countries can turn inwards, rely more heavily on their domestic markets and produce more things onshore, this was “not a choice open to Singapore”.

Singapore “has to take the world as it is, and develop a strategy that works for us in this troubled environment”, said Mr Lee. 

He added that while Government support schemes can help to “share the burden fairly and ease the hardship on households” in the short term, this will not solve the problem in the long term. 

“We must address the fundamental issue which is that higher energy and food prices have made us collectively worse off. And the fundamental solution to this is to make ourselves more productive, transform our businesses, to grow our economy, to uplift everyone,” he said. 

“Then our incomes can go up, and more than make up for the higher prices of energy and food. Then we can all become better off, in real terms.”

“NO ESCAPE” FROM RISING COST OF LIVING, GOVERNMENT WILL CUSHION THE IMPACT 

Singaporeans are already “feeling the impact of the war on the cost of living”, noted Mr Lee, and added that this is a worldwide problem. 

For instance, with Russia being a major exporter of oil and gas, “supply is being disrupted”, he said, explaining the rising electricity and petrol prices. 

“European countries are trying to stop buying energy from Russia, and Russia is also cutting off supplies to punish European countries for supporting Ukraine. That is causing a worldwide energy crunch. That is why our electricity and petrol prices have gone up sharply,” he said. 

Food prices have risen too, added Mr Lee. 

Due to the war, Ukrainian farmers have been running short on seeds, fertilisers and even fuel for their tractors. But as Ukraine is among the world’s largest exporters of cereal crops and vegetable oils, this has disrupted global food supplies. 

Except for solar energy, Singapore imports nearly all supplies of energy, said Mr Lee. 

"When oil prices were around US$50 per barrel ... our annual imports of crude oil and natural gas cost us about S$30 billion ... And when oil prices double (to US$100 per barrel), we have to pay double too," he said. 

The Ministry of Trade and Industry estimates our hit at around S$8 billion per year, he added. 

“That means we in Singapore have become collectively S$8 billion poorer off per year. And there is no escape from this.”

IMPACT OF RUSSIAN INVASION OF UKRAINE ON SINGAPORE 

Mr Lee also spoke about the war in Ukraine and its impact on Singapore. 

The Russian invasion of Ukraine is having a “far-reaching impact on the world and on Singapore”, and the fighting will “likely go on for quite a while longer”, he said. 

He explained that the stakes are rising, with the US and NATO countries stepping up supplies of weapons and military aid to Ukraine. Moreover, Russia sees the war as “a struggle against many Western countries”, and has even stated there is “a real danger of World War III”. 

The longer the war continues, the greater the risk of the conflict escalating, said Mr Lee, adding that peace will still remain elusive even if a ceasefire can be negotiated.

The war is now “not just between Russia and Ukraine” anymore – relations between Russia and countries supporting Ukraine have also been “severely damaged”. 

Most fundamentally, Russia’s attack on Ukraine has “undermined the global order” that is the “basic rules and norms for countries big and small to interact properly with one another”, added Mr Lee. 

“And that means not invading somebody else; claiming to put right historical errors and crazy decisions, because that is a flagrant violation of the United Nations Charter. And it's bad for every country, but especially for small states like Singapore. 

"Our security, our very existence, depends on the international rule of law," he said.

“And that is why Singapore has taken a strong stand, condemned the attack and imposed sanctions against Russia."