A prolonged period of sub-par global growth will eventually have an impact on Singapore unless governments across the world work to find solutions, warn local economists.
They told The Straits Times that Singapore is unlikely to be sheltered if a dire scenario described as "the new mediocre" by International Monetary Fund (IMF) managing director Christine Lagarde plays out.
Mr Sanjay Mathur, the head of economic research for Asia ex- Japan at the Royal Bank of Scotland, noted that the global economy has been struggling with growth since the onset of the global financial crisis in late 2008.
As an open economy whose fortunes are tethered to those of the world, Singapore will inevitably be affected. "Regardless of which way we look at it, whether manufacturing, financial services or logistics, there's no escaping for Singapore," said Mr Mathur.
"It's quite recognised that Singapore will not be able to mimic past growth rates."
The economic restructuring taking place in Singapore, in the form of a push to raise productivity and reduce reliance on foreign labour, is another factor complicating the situation here.
Nomura South-east Asian economist Euben Paracuelles said: "This would be a more difficult operating environment for Singapore and, given the internal restructuring, it could be more costly from a fiscal standpoint. The Government will have to provide more help for its people and businesses."
Ms Lagarde warned last week the euro zone could slip back into recession while the world could be stuck in a prolonged period of sub-par growth if not enough is done to boost employment.
She also pointed out that, globally, the unemployment rate stands at 200 million, 30 million higher than when the global financial crisis began.
The IMF cut its forecast for global growth next year to 3.8 per cent, down from a July estimate of 4 per cent. Developed economies, especially those in the euro zone and Japan, have been urged by the IMF to do more to encourage long-term growth in the real economy. One suggestion is to invest in infrastructure.
Economists said Ms Lagarde's comments are a wake-up call for economies not to be content with the present situation.
"Her remarks were directed at encouraging other major economies, the EU (European Union) and Japan, which are still at risk of entering deflation to take more decisive steps to remedy their circumstances," said Barclays economist Leong Wai Ho.
Mizuho economist Vishnu Varathan said: "The big idea is are we going to grow the pie so that everyone gets a share of a larger pie? If we don't, we settle into mediocre growth."
This article was first published on Oct 14, 2014.
Get a copy of The Straits Times or go to straitstimes.com for more stories.