Singapore – Refreshing the Leadership
Political instability is unlikely to be a major problem for investors to contemplate in the short term, with the ruling PAP in full command of the unicameral legislature, and Prime Minister Lee Hsien Loong making gradual adjustments to ensure a smooth succession. Lee has indicated that he is prepared to hand over power to a designated successor soon after the next general election, which is required by January 2021, but questions surrounding the state of the prime minister’s health have fueled speculation that voters might return to the polls as early as next year.
In any case, Lee is continuing to promote younger members of the party into positions of influence, with the most recent government shakeup carried out in late April bringing the appointment of Josephine Teo and Desmond Lee to the Cabinet as ministers in the Prime Minister’s Office. Lee has previously been identified as a rising star within the governing party, and, at just 40 years old, he is the youngest member of the Cabinet. Teo is 48, and her promotion makes her the second female of ministerial rank, along with Grace Fu, the minister of culture, community, and youth.
With six other high-flyers promoted, resulting in 22 full ministers overseeing 16 ministries, and nine senior ministers of state, Prime Minister Lee could be accused of creating a top-heavy administration. However, he is clearly attempting to establish a younger and more representative Cabinet, while also creating opportunities for as many of the next generation of political leaders to prove their ability to handle greater responsibility. The next reshuffle is expected to streamline the structure of the hierarchy, leaving a core group that will help to decide who among a handful of top contenders, including Finance Minister Hang Swee Keat and Chan Chun Sing, the secretary-general of the National Trade Union Congress (NTUC), will succeed Lee as prime minister.
Current leaders will be able to count on generally stable economic conditions as the go about the task of mapping out their strategy for a generational transfer of power. Robust activity in the manufacturing, trade, and services sectors more than compensated for a decline in construction in the first quarter of 2017, and with the combination of very low unemployment and decent wage growth sustaining consumer demand, that annual growth rate is forecast to tick higher, to 2.2%, this year. Low inflation, which is forecast to average barely more than 1%, and a projected budget surplus equivalent to 1% of GDP will create some room to use fiscal levers to nudge the growth rate higher if necessary to sustain the pace of expansion above 2%.
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