DPM Heng Swee Keat at the BOAO Forum for Asia Annual Conference 2022 Panel Session

Thank you for inviting me to speak. 

The economic prospects for Asia this year will depend very much on two factors – the continuing COVID-19 situation and the Ukraine conflict.  

COVID-19 has led to the worst economic crisis in a century. The global economy is just recovering. Different countries, depending on their circumstances and policy stance, have different public health measures in place. As global supply chains are highly integrated, specific clusters of activities are recovering at different speeds. The situation is still evolving, and we need to continue to calibrate response measures appropriately. On the whole, I remain cautiously optimistic about Asia’s economic outlook for the year. But the dark clouds have not fully lifted, and further bumps could still lie ahead. Should a new variant of concern emerge, the impact will depend on how long heightened public health measures would be required, and how strict they need to be.  

We are gravely concerned about the Ukraine conflict, and the devastating loss of lives. The conflict will also impact Asia’s recovery and growth. The conflict has yet again highlighted the importance of critical supply sources, especially in food and energy. Alternative supply chains can provide greater resilience, but at higher costs. Global inflation was already on the rise prior to the conflict. But the Ukraine situation has added fresh inflationary impulse. We are now faced with the prospect of opposing forces that restrain growth and raise inflation at the same time. So as we seek to exit the COVID-19 crisis, global central banks and fiscal authorities need to navigate the macroeconomic challenge skilfully. Decisive monetary policy action is needed to deal with the inflation threat, together with targeted fiscal support where needed for the most vulnerable segments. 

Beyond the near-term outlook, the risk of deglobalisation has increased, with the ongoing US-China tensions, as well as the recent use of financial sanctions. But we are not yet at the tipping point. The global trading system has proved quite robust despite the hurdles, with global trade at a record high last year despite the pandemic.  But we cannot take this for granted. COVID-19 has reminded us just how inter-connected and inter-dependent the world is. While frictions remain, we must remember growth and prosperity are achieved through cooperation. All countries would like to emerge stronger from this crisis. Within Asia, let us strengthen partnerships and deepen the integration of our economies, in an open and inclusive way. Let me highlight briefly three ways we can do so. 

First, we must continue to strengthen regional architecture and partnerships. The RCEP and CPTPP, two of the world’s largest plurilateral trade agreements, are anchored in Asia. We continue to welcome like-minded partners to join these arrangements and remain open to new partnerships ahead. 

Second, COVID has accelerated structural changes in the global economy, particularly digital and sustainability.  We should harness these as new sources of growth. For digital trade to be a key growth driver, we must work together to harmonise standards, enable the trusted flow of data, and empower greater participation in the digital economy. For sustainability, we should pursue this not merely as an economic goal, because climate change is existential to humanity. But green growth is a collective effort as it requires huge amounts of capital and leading-edge technology.  

The third way that we can emerge stronger is to strengthen the resilience of our economies. The foreseeable future will be full of uncertainty and increased volatility. We cannot on our own be resilient – but we can better manage disruptions through stronger collaboration, especially in ensuring the flow of critical supplies in times of crisis.  

Digital, sustainability, resilience. We have a full agenda ahead. To achieve these goals, we must set aside our differences. By working together, Asia, and the world, will not only recover from the pandemic, but emerge stronger in the post-pandemic world. 

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