Debated in Parliament on 5 Jul 2021.
Mr Desmond Choo asked the Minister for Trade and Industry in view of the lower rates of COVID-19 vaccination in most ASEAN countries (a) how will the Singapore economy be affected; and (b) how will this affect Singapore’s near to mid-term economic strategies with the ASEAN economies.
If the COVID-19 vaccination rates of many Southeast Asian countries remain low, they may affect Singapore in two ways.
First, it leaves our neighbouring countries susceptible to recurring waves of COVID-19 infections, which may require governments to implement social and mobility restrictions in order to control the public health situation. Such measures usually impede their domestic economic activity.
Second, low vaccination rates will likely slow down the pace of border reopening and the resumption of travel, not just for business but also tourism, another important driver of economic growth for the region. Both of these will affect Singapore's economic recovery, given our economic integration with our neighbours and the importance of regional travel to our hub status.
Nevertheless, the IMF has projected that the overall GDP growth rate of Southeast Asia in 2021 would be 4.9%, with the projected growth rates of individual countries ranging between 2.6% and 6.9%. While the projected 2021 GDP growth rates of some of our Southeast Asian neighbours had earlier been revised downwards due to their domestic COVID-19 situations, the impact on the Singapore economy is expected to be moderate. In particular, merchandise trade between Singapore and our neighbours is expected to remain healthy in tandem with the global and regional economic recoveries. Even amidst the COVID-19 pandemic, total merchandise trade between Singapore and Southeast Asian countries in 2020 was $239.6 billion, which was a slight decrease of 7.7% year-on-year. In the first quarter of 2021, total merchandise trade between Singapore and Southeast Asian countries was $69.3 billion, which was an increase of 6.3% compared to the same period last year.
In the long term, vaccination rates will improve and COVID-19 is likely to become endemic. The region’s underlying economic fundamentals remain strong and compelling, notwithstanding the impact of the pandemic. The economic prospects of Southeast Asia remain positive. The IMF has forecast that the region’s overall GDP would grow by more than 5% year-on-year from 2022 to 20251. This is buoyed by Southeast Asia’s young and dynamic population, and growing middle class, which makes the region one of the fastest growing consumer markets in the world. Consumers are also increasingly moving online, with almost 70% of the region’s population transacting online,2 making Southeast Asia an attractive market for the digital economy. Singapore will continue to pursue closer economic integration with Southeast Asia.
PAPERCUTS