SINGAPORE (Dec 23): Singapore companies and investors have had a forgettable year.

Economic growth slowed further, employment conditions weakened, property prices continued to fall while bad loans accumulated in some sectors.

Looking into 2017, a mood of caution persists in business surveys with local companies remaining concerned about high costs, weak demands and an increasingly uncertain global environment.

Although they are good reasons to be concerned about, there are also some reasons to be confident that Singapore will overcome these challenges.

Here are some global drivers that could determine the country’s performance in the coming year.

• Global demand on the upswing
Singapore is a small and highly open economy that is extremely sensitive to the ups and downs of the global cycle and the volatile fortunes of its regional hinterland. The good news is that with lead indicators for world trade improving, a rebound in global demand is underway and will produce an upside surprise to economic growth.

• Capital flow into Emerging Markets
But with stronger global growth a likelihood, the US Federal Reserve Bank is set to raise rates more aggressively, with at least four rate rises of 25 basis points each over the course of 2017. US dollar assets will also appear compellingly attractive and draw capital away from emerging markets. That means more rounds of turbulent financial markets in Singapore and EMs, followed by further weakness in EM currencies as well.

• Geopolitical uncertainties
The world is not going to be such a warm and safe place for small countries like Singapore and there will be more flash points in global politics that will unnerve investors in the new year. Whenever a new US president takes office, the country’s rivals often test the new leader with some challenge or other, just to gauge how far they can go. President-elect Donald Trump may invite more than the usual share of such challenges, given his controversial approach to foreign policy.

• Globalisation faces its biggest test yet
In addition, the globalisation which has benefited smaller nations such as Singapore and even Malaysia is under challenge from populist leaders in the US and Europe who question its benefits. The failure of the Trans-Pacific Partnership, in which Singapore had placed so much hope, is an example of these challenges, as is the UK’s vote to leave the European Union. This means we will almost certainly see an increase in trade restrictions across the developed world.

Nevertheless, Singapore has usually been able to come up with good policy response. In addition, Singapore has tremendous other strengths: We sit astride the three greatest growth stories in human history — China, India and Southeast Asia — and are well-positioned to benefit from their growth. Singapore is also well connected through a comprehensive range of free trade and economic partnership agreements with growth poles around the world. The republic’s labour force is also highly skilled and educational levels are improving all the time. Singapore has also built up tremendous fiscal reserves and can deploy those resources to invest in the future to an extent that few other countries can.

To find out what the other global and domestic drivers are, read all about it in this week’s copy of The Edge Singapore (Issue 760, Dec 26), available at major bookstores, 7-11 stores, and selected petrol stations.