Measures to Avoid Technical Recession and Help for Companies in High Interest Rate and Inflationary Environment
Ministry of Trade and IndustrySpeakers
Summary
This question concerns Mr Yip Hon Weng’s inquiry regarding measures to avoid a technical recession and support for companies facing high interest rates and inflation following a decline in the manufacturing Purchasing Managers' Index. Minister Gan Kim Yong replied that while 2022 growth is projected at 3% to 4%, the government is addressing cashflow issues by raising maximum loan quanta for the Enterprise Financing Scheme-Working Capital Loan to $500,000 and the Trade Loan to $10 million. He highlighted that $600 million has been allocated to the Productivity Solutions Grant and companies can access a $10,000 SkillsFuture Enterprise Credit for workforce transformation. Furthermore, the Manufacturing 2030 strategy focuses on attracting frontier investments, supporting local firms in adopting Industry 4.0 technologies, and strengthening the local talent pipeline through skills upgrading. Minister Gan Kim Yong emphasized that these initiatives aim to help businesses maintain a competitive edge and better withstand global economic slowdowns.
Transcript
12 Mr Yip Hon Weng asked the Minister for Trade and Industry in light of the drop in Singapore's purchasing managers' index from August to September 2022 (a) what measures will the Ministry put in place to avoid a technical recession; and (b) how is the Government helping Singapore companies in a high interest rate and inflationary environment.
Mr Gan Kim Yong: Weakening growth around the world amidst protracted supply disruptions and synchronised monetary policy tightening have led to a decline in Singapore's manufacturing Purchasing Managers' Index, or PMI, since May 2022. Similarly, growth in manufacturing output, as proxied by the Industrial Production Index (IPI), has slowed in recent months.
Notwithstanding the slowdown in the manufacturing sector, advance estimates show that the Singapore economy grew by 4.4% on a year-on-year basis in the third quarter of 2022, extending the 4.5% growth in the previous quarter. Growth was supported in part by the recovery in tourism-related and consumer-facing sectors. While growth is projected to slow in the fourth quarter of the year due to weaker external demand, the economy remains on track to grow by 3% to 4% for 2022 as a whole. For 2023, growth is likely to slow further in tandem with the global economy.
Singapore is an open economy. If major markets experience protracted or sharp slowdowns, we may not be able to avoid a recession. The Government will support our companies to better withstand the storm and emerge stronger. For example, to alleviate businesses' cashflow constraints, we have increased the maximum loan quanta of the Enterprise Financing Scheme (EFS)-Working Capital Loan and EFS-Trade Loan to $500,000 and $10 million respectively, up from $300,000 and $5 million respectively.
We have also stepped up our efforts to raise productivity, build capabilities and transform our businesses to seize new opportunities. This is the only sustainable way for businesses to maintain a competitive edge in the global economy. Over the next four years, the Government has set aside $600 million to scale up the Productivity Solutions Grant to support more than 100,000 projects. We also enhanced the SkillsFuture Enterprise Credit of up to $10,000 per company to embark on both workforce and enterprise transformation in tandem. Companies requiring more customised help can continue to tap on the Enterprise Development Grant, as well as other grants offered by our economic agencies for purposes like training and resource efficiency.
We will also press on with our Manufacturing 2030 journey to position Singapore as a global business, innovation, and talent hub for advanced manufacturing. This is done through a three-pronged strategy. First, to attract frontier investments, we are strengthening our ecosystem to make Singapore the top choice for investors. Second, we are supporting promising local enterprises to adopt Industry 4.0 technologies, pursue internationalisation and embrace innovation. Third, we are strengthening the pipeline of skilled local talent, by partnering employers to develop structured career progression pathways, working with our Institutes of Higher Learning on skills development, and supporting the skills upgrading of older workers.
We hope that companies will take full advantage of these schemes to strengthen themselves, transform their business, upskill their workers and stay competitive.