Article Topic – Weathering the euro storm

Business Times, Monday, 2nd Jul 2012

How is the weaker Sing dollar, and eurozone debt crisis in general, affecting businesses in Singapore, and is it likely to get better or worse? What should businesses here do in response, if anything?

THE obvious impact that a weaker Sing dollar and the eurozone debt crisis has on local businesses is the foreign exchange risk, particularly for companies in the import/export business. We have also already begun seeing some retrenchments affecting the local outposts of a few Europe-based MNCs with operations here, as the eurozone crisis has forced them to restructure their business and workforce in order to contain costs.

At the moment, the eurozone situation is too uncertain for us to predict whether it is likely to get better or worse. Much depends on the decisions to be taken regarding the monetary policies to help resolve the situation.

Should the eurozone break up, the consequence may be catastrophic as it will destabilise the euro and possibly trigger another meltdown of global financial markets. However, this is an unlikely scenario, as I believe that the political will of the EU leaders to avoid this is extremely strong and they should be able to find a way out of this mess eventually.

This may take a long time to resolve so Singapore business leaders should exercise prudence in their spending on investments for expansion, and watch closely as these developments unfold.

Ronald Lee
Managing Director
PrimeStaff Management Services Pte Ltd