Photographer: Veejay Villafranca/Bloomberg

Singapore Bets on Rising Asia Middle Class to Spur Economy

  • Southeast Asia to benefit from young population, urbanization
  • Political uncertainty won't necessarily detract from growth

The rise of the Asian middle class will remain the dominant regional growth story for years to come, enough to help Singapore cope with headwinds from the global economy, a top official said.

Even though the city-state’s economy is coming under strain, observers shouldn’t discount positive signs including resilient consumer spending in Southeast Asia and solid increases in air traffic at the Changi international airport, a regional hub, Economic Development Board Chairman Beh Swan Gin said in an interview Monday.

Beh says Singaporean businesses can take advantage of economies set to benefit from young and growing populations and urbanization, such as the Philippines and Indonesia. While some countries in the Association of Southeast Asian Nations are facing political uncertainty, that won’t necessarily detract from the growth outlook as long as they keep their economies open and follow market-friendly policies, he said.

“We are generally optimistic about the medium to long term,” Beh said. “Asean, despite all the political uncertainties, is coming along at a pace of economic growth of around 5 percent.”

Singapore’s EDB was formed in 1961 to help attract foreign investors, with a focus on boosting the country’s manufacturing industry.

Growth in the export-oriented economy was flat in the first quarter, while the central bank provided support to the sector by announcing it won’t seek currency appreciation.

Beh said the policy easing by the Monetary Authority of Singapore was probably aimed at improving the competitiveness of businesses.

"I think MAS was worried about the cost structure,” he said. “We are a small country, international trade is a big part of the economy, so if our cost structure is no longer competitive, the currency is a big reason.”

The impact on Singapore’s cost structure is transmitted through both external demand and import prices, the EDB elaborated Tuesday. The central bank moved to a zero appreciation path for the nominal effective exchange rate policy band to “reflect the underlying economic reality of subdued imported and domestic inflationary pressures,” the EDB said, referring to the monetary policy statement.

Efforts by the government to tighten the application process for foreign workers have become more targeted and aren’t aimed at any particular nationality, Beh said. The measures will be implemented in a way that’s mindful to investment, he said.

“If you are a company that is servicing Singaporean customers, it makes no sense having an all-foreign staff,” he said. “We want to continue to be open, there’s no question about that.”

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