SINGAPORE (Aug 6): As Singapore prepares to celebrate its 53rd National Day, it is a good time to take stock of where the republic stands and where it is heading. Since its last National Day, much has changed. The economic cycle has turned up, providing a welcome boost to the economy. But the upturn has also been accompanied by rising turbulence in global financial markets, which could put Singapore’s equity and currency markets at risk. Looking beyond the cycle, it is clear that the external environment has turned more challenging for Singapore in many ways in the past year. This places a heavier burden on policymakers to come up with strategies to keep Singapore on a steady path into the future.

A stronger world economy has brightened Singapore’s immediate growth prospects…

What a difference a year makes. A year ago, there were still reservations over how durable the recovery in global demand would be. The strong revival in the global economy in the later part of 2017 allayed these concerns. While some of this momentum has faded, export growth is likely to maintain steady expansion, as lead indicators suggest that global growth can be sustained and that import demand is rising in the big economies. The US’ economy, in particular, looks set to grow robustly in the coming two to three quarters as the full impact of the tax cuts and expanded fiscal spending feeds through to demand. US President Donald Trump’s economic adviser, Larry Kudlow, has hinted at even more fiscal stimulus. If so, capital spending, which lost a bit of momentum in the first half of the year, will revive and that will be positive for Asian exports of manufactured goods, especially the electronics components that Singapore has an edge in producing. For an economy such as Singapore’s, where external demand is so much more important than domestic demand, all this is good news.

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