It's unlikely to be a "V", but whether it will be a "U", "W, or "L" is anybody's guess, said Deputy Prime Minister and Finance Minister Heng Swee Keat about the possible shape of the economic recovery from the Covid-19 crisis.
This is because the level of uncertainty is unprecedented, he pointed out in an interview with The Straits Times and The Business Times yesterday - far more so than during the global financial crisis of 2008-09. The world is facing multiple shocks - a twin demand-and-supply shock across several industries, as well as a cyclical and structural shock.
Global supply chains - already under disruption from the United States-China trade war - are being further reconfigured as countries try to become more self-sufficient and bring some production lines closer to home. The nature of globalisation is changing, with more emphasis on resilience and reliability, and less on efficiency and productivity.
Also under way is a shake-up of the global workforce. More digitalisation and the rise of remote work means more jobs will be reshored as well as offshored, including to developing countries. These will include low-touch, white-collar service jobs.
The gig economy will expand its reach into new areas and become more global, with millions of newly empowered workers joining the global labour market.
Some of these changes will create new stresses, said Mr Heng. In his Budget round-up speech last Friday, he had talked about some of the pain to come. Some jobs will disappear and not come back. The economic fallout of Covid-19 will go beyond unemployment numbers; even many of those who keep their jobs may suffer underemployment and income loss. And many companies' business models will be broken, rendered obsolete almost overnight, especially in "high-touch" parts of the economy such as retail, food and beverage, and tourism, and even beyond.
Mr Heng believes Singapore's business community gets it. Corporate leaders realise they will need to digitalise, automate and pivot to new areas. They also accept that the Government can't keep forever shoring up companies with subsidies. Repositioning businesses will, for some, be difficult, but the task has begun.
Fortunately, Singapore has a head start with transformation, which the Government has been pushing for since 2016 when the first industry transformation maps were launched. Mr Heng recalled that at that time, some business leaders were in denial about the need to transform. "Why do we need to change?" they said. "What is this big thing that you are seeing?"
Nobody is saying those things now. The "big thing" has arrived.
As well, investments over recent years in skill development and retraining, including through the SkillsFuture programme, appear all the more relevant today.
In hindsight, Singapore was also prescient in stepping up its investments in research and development and bio-sciences, the returns from which were, for a long time, uncertain. Now, they are showing up in med-tech, biologics and vaccine development, which are among the new growth areas.
And so, despite all the uncertainty and painful changes that the Covid-19 crisis will bring, it also has some silver linings, according to Mr Heng.
One is that it will accelerate the digitalisation and automation that Singapore, as a labour-scarce economy, has long needed. Now, just about every small and medium-sized enterprise and every establishment, down to retail stores and even hawkers, is going digital. At the micro level, there is evidence that this has already started to pay dividends. Mr Heng discovered, to his surprise, that his favourite Peranakan restaurant in Bukit Timah was doing "okay", despite being closed, because it suddenly found it could cater to customers as far away as Changi. There will hopefully be more cases like this as the adoption of e-commerce spreads and more companies embrace the changes forced upon them.
Another silver lining lies in the fact that of all the regions in the world, Asia is likely to be among the earliest to open up. China is already doing so; South Korea, Japan, Taiwan, as well as Australia and New Zealand - which have largely brought Covid-19 under control - are also opening up earlier than other countries. So, even though the climb back may be long and hard, Singapore is in the right place for the post-Covid-19 world.
Telecommuting is also being accepted as the new normal. This is good for sustainable development, said Mr Heng, as it cuts our carbon footprint without disrupting the economy or our lives too much.
So, sometimes, crises can trigger constructive change, he pointed out.
He recalled that the stress test of the 2008 global financial crisis forced banks and other financial institutions to become more resilient through recapitalisations and tighter regulations. Had banks been operating now as they did before the global financial crisis, they would have been decimated by the Covid-19 crisis - and the world would have had another global banking crisis on its hands.
So, one of the big lessons we have learnt from crises, he said, is that what doesn't kill you makes you stronger.
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