High business costs, property glut to hurt S’pore’s prospects: Bhaskaran

SINGAPORE — Domestic headwinds such as high business costs and property oversupply continue to weigh on Singapore’s prospects and there will be no huge acceleration of economic growth for this year and next until they are resolved, Mr Manu Bhaskaran, founding CEO of Centennial Asia Advisors, said today (Jan 12) at the ISEAS Regional Outlook Forum.

The cost structure on all sorts of immediate services and business costs have increased and Singapore is now losing its competitive edge compared to its neighbours, said Mr Bhaskaran, who is also a member of the regional advisory board for Asia, International Monetary Fund and adjunct senior research fellow at the Institute of Policy Studies, Lee Kuan Yew School of Public Policy.

“There has to be an adjustment in response to that. The adjustment is painful - it means relocation, cutting costs, hopefully to improve productivity. If that doesn’t work, you have to squeeze your suppliers, renegotiate rental agreements with landlords,” he said.

The glut in the real estate market is also a problem, Mr Bhaskaran said.

“In the real estate sector, with the supply and demand convergence now very visible, we don’t have to go very far to see how much extra supply is coming onstream as a whole, in residential, com-mercial and offices. In addition to that, interest rates are rising,” he said.

The United States’ Federal Reserve raised its benchmark interest rate by 25 basis points in De-cember to between 0.25 and 0.5 per cent, the first hike in nearly a decade, Domestically, Singapore consumers will face higher loan repayments as borrowing costs rise with the Fed rate hike.

However, even as the property segment faces headwinds due to the rising interest rates, Mr Bhaskaran noted that the US recovery will give the Singapore economy a leg up.

“The electronics sector – a major contributor to Singapore’s gross domestic product - is still important and will win big if G3 capital spending recovers,” he said.