ASEAN-4 economy: Singapore to become “smart nation”

Published in EIC Outlook Q3/2017 Click here for more detail

Singapore’s economy recovered gradually in the first quarter of 2017. GDP expanded by 2.7%YOY, driven mainly by the manufacturing sector, a key part of the Singaporean economy, and especially the electronics industry, boosted by rebounding global demand. The Singapore Manufacturing Purchasing Managers’ Index (PMI) was at 50.9 in June, in its tenth straight month of improvement. Manufacturing output rose by 6.7%YOY in April. Inflation has remained positive since December 2016. These numbers indicate that the Singaporean economy is standing on solid ground.

EIC forecasts that Singapore’s economic growth will come around 2.3% in 2017, closed to the government’s forecast, supported by external factors. The key risk is a rising unemployment, which has climbed since the beginning of 2017, reaching 2.3% in March. Moreover, non-manufacturing sectors, which have been struggling to grow, might negatively impact domestic consumption. Singapore also faces risks from the economic slowdown in China, a key trade partner. Exports to China accounted for 13% of Singapore’s total exports in 2016. The main category is electronics, especially integrated circuits.

Regarding its long-term development goals, the government has announced Singapore’s aim to be the world’s first “smart nation.” Singapore will use internet of things (IOT) technology to better manage the city and improve quality of life. Focusing on transportation and healthcare services, the government will deploy IOT tech such as apps that use GPS to track the location of buses and video-call health consultations between physicians and patients. Singapore launched a program called AI.SG to support the development of artificial intelligence (AI) for use in city finances, healthcare and urban planning. The project calls for USD107 million¹ in funding over the next five years. The government has also set up a Committee on Future Economy (CFE), which in February announced a set of strategies² to achieve sustainable growth. These programs and policies show that leaders are making an effort to steer Singapore through an era of great change to reach a sustainable future.

Implications for Thai Economy

• The Indonesian economy saw robust growth in 2016. As a result, Thai exports to Indonesia expanded 7.4%YOY in 2016, led by cars and parts, sugar and plastic granules. Indonesia is Thailand’s 9th largest export market, accounting for 3.8% of Thai exports.

   

• FDI inflows to Indonesia dropped by 5.49%YOY, but will likely increase in the future as the government ramps up support for foreign investment.

   

• The Indonesian rupiah strengthened by 2.6% against U.S. dollar in 2016 due to higher capital inflows, especially in the stock market and government bonds. During 2017, however, the rupiah will be more volatile than the baht, as a result of the high share of foreign holdings of Indonesian domestic bonds, which currently stands at 39%, far above the 15% share in Thailand.
  
  

¹ Data from CNBC and Straits Times as of 3 May 2017
² 2017 Report of the Committee on the Future Economy: Pioneers of The Next Generation.