Singapore Losing Competitive Edge as Currency Soars: Expert
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Singapore Losing Competitive Edge as Currency Soars: Expert
The languishing U.S. dollar has resulted in unprecedented gains for other currencies. The Singapore dollar, for one, hit a record high against the greenback on Wednesday, as the latter scraped three-month lows versus a basket of currencies.
While this may spell cheer for investors long on the Singapore dollar (Exchange: SGD=), it paints a less rosy picture for the nation's economy, say financial experts.
Wei Zheng Kit, an analyst at Citi, notes that while Singapore remains competitive on many measures, the appreciation of the Singapore dollar could erode its advantage in the near term.
"While SGD appreciation can eventually curb domestic inflation, it may exacerbate the loss of cost competitiveness in the short run, because of the lag needed for a stronger exchange rate to bring down inflation," Wei said, in a report.
Singapore's June consumer price inflation (CPI) rose to it's fastest pace in six months, to 5.2 percent, driven by rising housing and food costs.
"Since 2008, Singapore has seen inflation outpace foreign trade-weighted inflation, reversing the pattern for the past 20 years," according to the Citi report.
The Singapore dollar is among the best performing currencies in Asia this year, since the state's de-facto central bank - the Monetary Authority of Singapore (MAS) - said in April it would allow further appreciation to tame price gains. The currency has gained over 6 percent versus the U.S. dollar so far this year, and 24 percent in the last five years
There are already signs the stronger currency has been crimping competitiveness. According to the 2011 World Competitiveness Index report compiled by Swiss business school IMD, Singapore slipped from the top spot to third, overtaken by the U.S. and Hong Kong.
Citi says the effect may be most pronounced in the labor market.
"The supply shock from tightening of foreign worker inflows will likely imply wage growth could be structurally higher than the 3 percent annual average of the 2000s," the report stated. "More importantly, wages have risen faster than Asian competitors, especially once FX appreciation is included."
Meanwhile, as wages climb, productivity has not kept pace. The report predicts growth in Singapore's unit labor costs to "likely outstrip those of its Asian competitors in 2011, similar to the overheating period in late 2006-2008."
The spillover from a stronger Singapore dollar is also being felt in the property sector. Citi observes that while Singapore's office rents were lower than Hong Kong's, the gap is narrowing as its currency appreciates.
Losing its competitive edge may sting the most during the next economic slump, but Citi says Singapore has the ammunition to lessen some of the pain.
"The loss of cost competitiveness could prove to be a double whammy once the economy is in recession, though this could at least partially reversed via monetary easing."
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wha???
it's not that our currency has soared but rather the US$ has gone to shit
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It stated that wages have risen ? ? ?
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so....is my food getting cheaper?
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Originally posted by shanfan:
It stated that wages have risen ? ? ?
simple.. if you are paid in SGD, to the US citizen, your wage has increased because the USD has gone to shit..
the same way the US citizen's wage has become a lot lower to the Singapore Citizen now that the USD has gone to shit..
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Originally posted by Jiani:
so....is my food getting cheaper?
No. As Singapore imports a lot and most people charge in USD instead of their home currency and due to the USD going to shits, they have to charge more to get back the same amt i their home currency
Also this point alone is too simplistic and there are many other factors in play like supply vs demand vs weather news etc
All in all commodities have an upward trend and coupled with the weak USD a definate NO
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Originally posted by the Bear:
simple.. if you are paid in SGD, to the US citizen, your wage has increased because the USD has gone to shit..
the same way the US citizen's wage has become a lot lower to the Singapore Citizen now that the USD has gone to shit..
Oh yes, thanks for that. -
Originally posted by Jiani:
so....is my food getting cheaper?
Is your hawker about to lower his prices? What about your transport provider?
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Originally posted by alize:
Is your hawker about to lower his prices? What about your transport provider?
i dun think so -
just to contain the inflation
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Nowadays online buying rocks due to currency. Go overseas also cheaper. Go overseas study my frenz pound drop save lots of money the mom smiling.
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Maybe we can keep the Singapore Dollar artificially low just like China to make it cheaper for foreign and local companies to export!
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Originally posted by shanfan:
It stated that wages have risen ? ? ?
æ–ç« å�–义，è¯æ— 伦次。
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Originally posted by Jiani:
so....is my food getting cheaper?
not unless you eat all your meals overseas and then come home.
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Originally posted by dragg:
not unless you eat all your meals overseas and then come home.
hahaha....welcome home.
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Originally posted by nfshp253:
Maybe we can keep the Singapore Dollar artificially low just like China to make it cheaper for foreign and local companies to export!
and make it a horrific time for the citizens who earn their wages in SGD..
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Originally posted by nfshp253:
Maybe we can keep the Singapore Dollar artificially low just like China to make it cheaper for foreign and local companies to export!
Singapore's exports really do not have much impact on the lives of singaporeans. Really. so there is no point in keeping SGD low.
Our chief exports:
1) Petroleum
2) electronics
3) Pharmaceuticals (drugs)
how many singaporeans do you know working in these industries?
1) Refined petroleum. the world will always buy up petroleum regardless of the price. therefore, the strength of the sgd doesnt matter.
2)Electronics. There's no many singaporeans working in the manufacturing sector. go visit any industrial park/ factory. you will find that most of the staff are FWs. Fluctuation in exports doesnt affect locals too.
3) Pharmaceuticals: Higher percentage of locals. But, patients all over the world would still need their medicine regardless of the price. hence, there's also not much impact too.
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The theory of a weak domestic currency fuelling export only works in labour intensive industries which hires mostly locals. i.e. Chinese factories in China, employing Chinese citizens.
here: MNCs in singapore, hiring mostly FWs. Singaporeans are left out of the labour circle, and thus exports doesnt matter that much as compared to the past.
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the high S$ is keeping local gals to be maids in other countries
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Originally posted by sgdiehard:
æ–ç« å�–义，è¯æ— 伦次。
Did I force you to read? Go lick the asses of your idol PAP, you Malaysia PR who bought a flat here .
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did anyone notice? events in singapore is drawing almost parallel in animal farm
read the book to get what i meant
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Originally posted by Jiani:
did anyone notice? events in singapore is drawing almost parallel in animal farm
read the book to get what i meant
Many mentioned the same as you before.Getting worse each day.
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Originally posted by shanfan:
Many mentioned the same as you before.Getting worse each day.
maybe i should write a book "singapore farm" -
Originally posted by shanfan:
Many mentioned the same as you before.Getting worse each day.
animal farm is really my favourite story book!i dunnoe why moe allow the sec 1 to read to book.
somemore its a must
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Originally posted by Jiani:
maybe i should write a book "singapore farm"i dislike both animal farm and to kill a mocking bird.
but then many love them.
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Originally posted by nfshp253:
Maybe we can keep the Singapore Dollar artificially low just like China to make it cheaper for foreign and local companies to export!
expensive to import food... Dun forget we dun grow our own veg, rear our own foul anymore.