Cheap oil feared to wreak havoc on Singapore’s economy

Consumer spending will take a hit.

Business leaders in Singapore are jittery over the effect that low oil prices will have on the local economy, according to a survey by Ipsos Business Consulting.

The survey showed that over a quarter of business leaders expect their profits to shrink this year, mainly on back of low oil prices, fluctuating regional currencies and concerns over the wider global economy.

“As Singapore is one of the world’s leading oil trading and refining hubs as well as being an important shipping centre, a significant proportion of the population gets impacted by any downturns in these sectors,” said Tim Hill, Business Development Director of Ipsos.

Citing government statistics, Hill added that the market size for oil and gas was expected to drop in 2015 by over 40% on 2014 and to stay down in 2016. Earlier in the year, 44% of the business leaders surveyed indicated that cheap oil would have a big impact on the local economy.

A survey respondent commented that the price of oil will change the flow of capital which could seriously impact other industries, while another executive mentioned that marine, offshore oil & gas and shipbuilding industries are severely affected by medium term low oil prices.

“A whole eco-system of supporting and surrounding businesses have risen with the tide of Singapore’s growth in this sector over the years, and can be expected to get stranded with the outflow of investment in a downturn. This in turn will impact overall consumer spending,” Hill said.

Despite this, Singapore businesses are pinning their hopes somewhat on their Asean investments with over 50% expecting that their Indonesian sales will provide their biggest growth market for 2016.

Meanwhile, 43% of respondents are also expecting that the implementation of the Asean Economic Community in 2016 will help their businesses, while 40% indicate that they will reconsider their regional set up and investments in 2016 if Trans Pacific Partnership goes ahead as planned.