DP Lawrence Wong seen staying on ‘same growth, policy path:’ expert 

External risks are the biggest threat to growth.

Singapore’s new Prime Minister Lawrence Wong is expected to stay on the same track and expand the existing policies he inherited, in the face of heightened risks the city-state the is facing at home and globally, according to Bloomberg Economics.

Wong, formerly the deputy prime minister and minister for finance, on Wednesday evening sworn in as the fourth prime minister of Singapore in a historic ceremony that marked the city-state’s first leadership change in 20 years, as Lee Hsien Loong stepped down from office.

“Lawrence Wong will inherit a plate full of challenges — but also well-oiled government machinery to tackle them. He is likely to continue, and expand upon, existing policy initiatives rather than chart a new course,” Bloomberg Economics senior economist Tamara Mast Henderson said in a note.

Henderson sees external risks as the biggest threat to Singapore’s economic growth in the coming years such as de-globalization and climate change. If left unchecked, she said these risks will likely push costs even higher, further weaken overall demand and curb investments.

The growing re-shoring and near-shoring trend among multinational companies dampens the Lion City’s appeal to FDIs in this segment. Rising sea levels also pose a threat to its infrastructure needs.

“Climate defense measures will divert significant resources to productivity-maintaining projects, at the expense of those that would otherwise enhance productivity and lift growth potential. That’s not just for Singapore, but also its major trading partners,” she said.

PM Wong is also expected to address the challenges the Lion City is facing domestically, particularly the rising cost of living and the aging population.

“These factors are also a global phenomenon, thus posing a double threat to Singapore’s economy. The government is already working to mitigate these issues. Its intention is to leave no citizen behind so that all can aspire to have a better life,” Henderson said.

Softening the blow is the government’s ample savings that can support the new PM and his initiatives to manage the impact on the economy, she said.

She added the city-state’s enduring appeal to investors and long-standing reputation for having a business-friendly environment also ensures a steady flow of trade and FDIs.

Bloomberg Economics sees Singapore’s economy expanding by 0.8% this year and miss the 1%-3% forecast of its central bank. Moving forward, economic growth is likely to pick up to 1.8% next year and further to 3% in the long term, barring major external shocks.