The violent synchronized sell-offacross many emerging markets this summer has served as a rude awakening for policymakers in Asia, in particular. The market correction, at its heart, reflects fears that too many governments have relied on fiscal and credit easing to power above-potential growth in recent years, rather than capitalizing on the era of ample global liquidity to push through structural supply-side measures. From India, Indonesia, China to Vietnam, rising financial imbalances or competitiveness challenges – thanks to inertia over supply-side reforms – blight the growth outlook more than the US Federal Reserve’s shift to a less accommodative policy.
Singapore, however, has continued to blaze a reformist trail in recent years through labour and financial reforms in order to boost productivity and competitiveness, ensuring the city-state continues to punch above its weight in the region, despite being the size of the urban corridor of a medium-sized provincial city in China.
The government has reaped the benefits of its highly competitive and diversified economy to ride through the global storm in 2008, while, in recent years, it has focused on restructuring the corporate sector and addressing social-cohesion concerns, rather than deploying a growth-at-all-costs macroeconomic policy.