Opinion

Is the Slowing Economy Really Going to Be That Bad for Singaporeans?

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Joanne Poh

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Ask any Singaporean about the economy, and he’s likely to turn to you with a black face. Everybody knows the economy is in trouble, but what does that actually mean? The trouble is, a lot of what’s been said about the economy moving forward is guesswork—albeit informed guesswork performed by experts. Here’s what you need to know:

 

Experts are divided over whether there will technically be a recession, but GDP growth is definitely slowing

One day you read about how we’re headed towards a recession, and the next you have another commentator reassuring us that that’s unlikely to happen.

But does that really matter? The word “recession” is just a technicality used to describe a period of decline. There are certain criteria that must be satisfied before an economy can be said to be in recession.

In the July to September 2016 quarter, the economy contracted by 2% when compared to the previous quarter. If there is once again a contraction in the October to December quarter, the economy will officially be in a recession.

Whether that actually happens or not doesn’t take away from the fact that, over the longer term, GDP growth is definitely slowing. Analysts have predicted GDP growth to be between 1% and 3% in 2017, but judging by the way things are going we should probably expect something on the lower end of the scale.

So recession or not, businesses are going to find it more challenging to survive, and employees are going to find themselves facing a tougher job market.

 

People are tightening their belts, and you’d be right to follow suit

You might not be able to tell based on the number of Chanel handbags that continue to swarm Raffles Place, but Singaporeans have been tightening their belts, with only 0.6% growth in their private consumption in the July to September quarter. Experts think this is because of slower wage growth and a more difficult labour market for employees.

Well, there’s a good chance you should be curbing your own spending, too, as the slowdown is expected to hit most sectors.

One of the biggest implications for employees is slower wage growth. The median income grew by a modest 3.2% in 2016 after adjusting for inflation, and analysts are pessimistic about 2017. So don’t go spending all of your year-end bonus just yet.

In addition, the labour market is likely to be soft, which means there will be fewer job openings, so don’t be so quick to quit your job without another one lined up, and try not to get caught surfing Facebook by your boss too often.

While the unemployment rate is still low at around 3% despite the spate of retrenchments this year, that’s got a lot to do with the fact that there are no unemployment benefits in Singapore, so people will do whatever it takes to get back into the market, even if it means driving taxis.

 

A bleak 2017?

So, what lies ahead for Singaporeans in 2017?

One thing we can definitely expect is weakening global trade, which is bad news as our economy is very reliant on it. After all, one of the key reasons Singapore became wealthy was because of its dedication to free trade. Exports just took a big dip in October, so….

It’s been mere weeks since Trump was elected, and we’re already feeling some of the effects—especially the impending demise of the Trans-Pacific Partnership. The TPP would have had a positive impact on the Singapore economy. Then there’s Brexit. There probably won’t be an immediate fallout, but in the longer term it might negatively affect our economy.

Basically, while different analysts are displaying differing levels of pessimism, everyone is in agreement that we’re not looking at a good 2017, or even next few years.

Of course, how badly you’ll be affected as an individual really depends on your circumstances. If you have the foresight to be working in a growth industry and are using the slowdown to seize investment opportunities, you could well come out on top. Apart from that, there are still many things you can do to make sure you maximize your money, so follow us on Facebook for more tips as we weather the storm together.

What are you doing in preparation for the slowing economy? Tell us in the comments!

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Joanne Poh

In my previous life, I was a property lawyer who spent most of my time struggling to get out of bed or stuck in peak hour traffic. These days, as a freelance commercial writer, I work in bed, on the beach, in parks and at cafes, all while being really frugal. I like helping other people save money so they can stop living lives they don't like.