The economic numbers could hardly appear more horrible for Singapore. Non-oil exports plummeted by 11% in March from the previous year, following even steeper falls the preceding two months. Since its 2008 peak the Singapore dollar has lost more than a tenth of its value against the U.S. dollar, making it one of the worst performing currencies in Asia so far this year. And, if this drumbeat of economic gloom weren't enough, the Singapore government has repeatedly revised its economic growth projections, growing more vigorously pessimistic with each try. It now expects Singapore's gross domestic product to shrink by up to 9% in 2009, which would likely be the sharpest contraction in Asia this year. (See pictures of the global financial crisis.)
Numbers like these suggest Singaporeans are in a funk so deep only psychiatrists would be flourishing here. Consumer confidence has fallen to an all-time low, according to pollster A.C. Nielsen's latest bi-annual survey. Yet the city's malls and restaurants are no less crowded than before. Property launches are thronged, especially for cheaper suburban homes. Nor are Singaporeans just flipping the pages of the glossy property brochures or sadly gazing at the architectural models, wishing they were one of the frolicking toy figures in the miniature pool. They're buying too. Property developers sold 1,332 units of new private homes in February, a bumper sales crop that was the highest since August 2007, when the economy was booming. (See 10 things to do in Singapore.)
Singapore, it seems, is suffering somewhat less than it appears. Unlike the U.S., where companies slash jobs at the first sign of financial trouble, many of Singapore’s largest companies are controlled by the government. Retrenchments at such government-linked giants as offshore oil rig builder Keppel Corporation, shipper Neptune Orient Lines, or DBS Bank are considered a last resort, after pay cuts, reduced employer contributions to retirement funds, and unpaid leave. A spokesperson for Singapore Airlines, for example, confirmed that in early April roughly a tenth of the airline's 14,000 employees had agreed to take unpaid leave. (See 25 people to blame for the financial crisis.)
As a result, while paychecks are taking hits, they aren't evaporating. Singapore's unemployment rate of 3.2% as of March has been creeping up but is still very low compared with the U.S. or Europe. "Instead of outright retrenchments you have days cut from work," says Manu Bhaskaran, an economist with the Centennial Group in Singapore. "When you cut somebody's pay by 10 or 12%, how much less will they spend? They might not buy a new Versace shirt but they'll still go out to eat."
Or drink. Waking up late one morning after a night in the bars of Singapore's Emerald Hill neighborhood, Troy Toon groggily admits he's still partying "though I try to have fewer drinks." A 29-year-old web designer, Toon says the downturn hasn’t driven away his customers, even if they are more frequently asking for discounts. "Some of them have been asking rates to go down by about a fifth," he says. So far Toon has been compensating for this lost revenue by being abstemious with taxis and other incidental expenses. "We're not facing too much trouble," he says.
Alan Soh, a thirtysomething entrepreneur who runs his own six-person interior design firm, says his firm is coping too despite being closely tied to the recession-wracked construction industry. By temporarily switching his focus to aging buildings, where the volume is lower and margins are thinner, "I've managed to keep our business going," he says. Soh is guardedly optimistic about the future. "There are eight to nine thousand new [apartment] units being finished off this year and they're all going to need lighting fixtures and painting work," he says, which is one reason why he hasn’t let go of any of his workers.
Some Singaporeans are more seriously affected, of course, especially in the manufacturing areas of the economy hardest hit by the drop in global trade. Yet, while the city-state (population: 4.84 million) routinely is ranked as one of the world's freest economies, it also has a sturdy social safety net. Kalithas Krishnan lost his job at a Swiss-owned cargo operator at Changi Airport at the end of March. Today he receives a monthly total of $260 in cash and food coupons from the Singapore Indian Development Association, one of several government-funded charities, plus $55 to defray school expenses for his 16-year-old son. This support may not sound like much, but because Krishnan has fully repaid the mortgage for his three-room public housing estate apartment, thanks in part to a government scheme that allowed him to use his retirement savings to pay down the loan, the stipends take care of most of the household expenses while Krishnan looks for another job.
Drawing a comparison with Social Security in the U.S., where one's money is often locked up until retirement, P.K. Basu, Singapore-based Asia economist at Daiwa Institute of Research, says, "Individuals really own their savings in Singapore. You get to use what you put in."
Singapore is no bastion of socialism. But when the country's economic czars began to attract multinational companies like Hewlett-Packard, IBM and Matsushita to locate their manufacturing facilities in Singapore in the 1960s, they tacitly agreed to keep wages for blue-collar workers low by de-fanging the unions that once had a stranglehold over the labor force. As a cargo handler, for instance, Krishnan made just $1,000 a month.
But in return the government also made certain the billions that flowed in the form of foreign investments and corporate taxes was plowed into public housing, health care and public education. "Now the government is using some of its enormous wealth to mitigate the pain for its citizens," says Daiwa's Basu. Welcome news to everyone in Singapore, no doubt, except for those hoping for shorter lines into the city's hottest bars and restaurants.