Singapore will be Southeast Asia's weakest economy, shrinking nearly 5 per cent this year, while Thailand faces its worst recession in 11 years, reflecting a collapse in exports across Asia, a Reuters poll shows.
Singapore's export-dependent economy is not alone in this trend, the IMF has predicted that other export-dependent economies in the region, including Hong Kong and Taiwan are going to be hard hit in the coming years.
Singapore’s answer to the crisis is to stick to its current formula of exporting high-end goods. Minister Mentor Lee Kuan Yew was quoted as saying “I've got economists saying you've got to change your system. Wall Street Journal has said, 'Oh, this won't work, consume yourself'. Four million people to consume and keep an industry that supplies the world with top-end goods - it's rubbish”
He has previously said that Singapore's recovery depends on that of the United States and that the world's biggest economy was "fundamentally sound".
Assuming that the current failing birth rate holds, Singapore will have to find an uneasy balance between its short-term reaction to the economic crisis in the form of layoffs and the long-term need for large volumes of foreign labour due to its current export-oriented market economy.
A report released this month by the Department of Statistics showed 39,935 babies were born in 2008, well short of the 60,000 births the country needs each year to maintain its population.
Currently, large numbers of workers from larger and poorer countries, notably Indonesia, the Philippines and Vietnam, are drawn toward the more prosperous states of Singapore, Malaysia and Thailand. According to Forbes, Singapore has the greatest number of immigrants in proportion to its population in the region. Estimates of job losses among foreign workers in the coming 12 months range as high as 200,000, or 4% of the city-state's total population.
In previous economic cycles during which migrants have returned home in large numbers, relations between source and destination countries have become strained. Likewise, the present situation threatens to increase pre-existing social stresses, with Singaporeans turning to low-wage positions such as that of bus driver, and thus viewing migrants as competition in the labour market.
Reuters, Singapore's economy to take at least 3 years to recover, 20 march 2009, http://www.reuters.com/article/economicNews/idUSSIN41621120090321
BBC, Singapore PM warns over economy, 18 March 2009, http://news.bbc.co.uk/2/hi/asia-pacific/7949794.stm
The Straits Times, S'pore fares worst in SE Asia, 18 March 2009, http://www.straitstimes.com/Breaking%2BNews/Singapore/Story/STIStory_351...
Forbes.com, Southeast Asia's Labor Migration, 16 March 2009, http://www.forbes.com/2009/03/13/southeast-asia-reverse-migration-busine...