These are the three biggest risks to Singapore's growth this year

China's economic rebalancing is one.

According to OCBC Treasury Research, there are three main risks to S’pore’s growth this year – two external and one domestic.

The first likely stems from the economic rebalancing story in China, who remains the 800-pound gorilla in the region, especially given lingering concerns about the liquidity/interbank lending situation and shadow banking/trust problems, and whether any policy mis-steps could result in a hard landing scenario, or worse, an escalation of political tensions with Japan over the south sea islands.

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On balance, a sluggish China has significant economic implications for Asian economies, including Singapore, whether from trade, investment, visitor arrivals or even property demand.

The second external risk is the market adjustment process to the Fed’s decision to continue to push ahead with QE tapering. As the January bout of market volatility for emerging markets revealed, the mean reverting tendency of the QE-fuelled liquidity that washed into EM/Asian shores in the last five years post-GFC are likely to return to the developed markets as growth and business opportunities pick up back home.

And as the famous quote goes, when the tide goes out, you get to see who’s been swimming naked. That said, there are key fundamental differences for Asia resilience today compared to the 1997 Asian Financial Crisis, so it’s also wrong to tar everyone with the same broad brush.

The domestic challenge remains that of S’pore’s ongoing economic restructuring efforts, especially to boost labour productivity, curb foreign manpower dependency and cool asset prices (particularly property) and how smoothly the adjustment process will be for businesses and Singaporeans.

While headline and core inflation are expected to be more well-behaved this year, there is still a lot of cost and margin pressure on the ground for corporates who are navigating a more tricky environment of balancing costs with tight manpower staffing and volatile overseas market demand, and the upcoming Budget announcement on Friday is expected to help address some of these challenges.