SINGAPORE: Singapore must prepare for a tough road ahead with multiple economic challenges such as spiraling inflation and rising energy prices, Prime Minister Lee Hsien Loong warned on Sunday, urging citizens to “stay open and make our economy stronger and more resilient. The ongoing war in Ukraine, which shows no signs of abating, has undermined the global order, affecting smaller city-states like Singapore whose security relied on the international rule of law, Lee said during his May Day address. .
As a result of global headwinds driving up energy prices, Singapore will take a hit of SGD 8 billion a year, it added, citing estimates from the Ministry of Trade and Industry.
“That’s 1.5 percent of our GDP,” Lee said. “That means we’ve collectively become SGD8 billion poorer per year, and there’s no escaping this,” Lee was quoted as saying by The Straits Times at the rally held to mark Workers’ Day here.
Singapore imports almost all of its energy supplies, except for the solar electricity it generates.
For example, when the price of oil was around USD 50 per barrel, Singapore’s annual imports of crude oil and natural gas cost approximately SGD 30 billion per year.
But when oil prices double to $100 a barrel, as they have in the past 16 months, Singapore also has to pay twice as much, meaning an additional SGD 30 billion per year, Lee said.
“We can recover some of this by charging more for our exports. But the rest must be borne by us, by households, businesses and the government of Singapore,” he explained.
The war has worsened global inflation as Russia is a major exporter of oil and gas, and Ukraine is among the world’s largest exporters of grain crops and vegetable oils, he noted.
Lee added that the stakes in the crisis are also rising as the war continues with no positive outcome in sight.
Last week, Singapore’s central bank said it expects global growth to slow to 3.9 percent in 2022 from 5.4 percent last year as inflation rose to a 14-year high.
“Inflation was already a problem before Ukraine, but the war has made it worse. The war has caused a global energy crisis and disrupted food supplies,” he explained.
Prime Minister Lee said Russia’s attack on Ukraine has undermined the global order – the basic rules and norms for how all countries, big or small, interact with each other.
Amid the war in Ukraine and rising cost of living, Singaporeans need to be prepared for more economic challenges, but the government is “doing all it can to cushion the impact on Singaporeans and ease cost of living pressures” , he claimed.
“If Singaporeans are not strong and united, if we allow ourselves to divide and divide, we will be finished,” Lee observed.
“Singapore’s economy relies heavily on international trade and investment. If countries no longer accept free trade rules, it will be more difficult for us to continue to attract investment,” Lee was quoted as saying by the main daily.
“Our strategy must be to stay open and make our economy stronger and more resilient,” he added. The war in Ukraine has clouded Singapore’s post-COVID-19 recovery outlook, about which it was “cautiously optimistic” earlier in the year, the prime minister said.
The city-state has lifted travel restrictions and reverted to pre-pandemic routines. Last month, the government also removed tests for incoming vaccinated visitors and limits on gatherings.
Interestingly, Lee’s May Day speech marks his first major national speech since the ruling People’s Action Party selected Finance Minister Lawrence Wong to succeed him as the next prime minister.