Singapore’s prime minister warned Friday that economic growth will slow this year and some countries may slip into recession as the Middle East crisis keeps the Strait of Hormuz closed.
In a May Day speech, Lawrence Wong said the war was not expected “to be over anytime soon” and supply disruptions may worsen in the months ahead.
Shipping through the strait, which handles a fifth of global oil and gas, has been effectively stopped since the United States and Israel began bombing Iran on Feb 28.
“Here in Asia, we are especially affected because of our high dependence on energy and other critical supplies from the Gulf,” Wong said.
Some regional countries are already facing fuel shortages, airlines have cut flights and factories are reporting delays, he said.
“Globally, inflation will rise, spreading from energy to food and then other essentials. Some economies may well slip into recession, and Singapore will feel the impact directly,” he said.
“Our growth this year will slow, and inflation will be higher, and all this will put real pressure on businesses, workers and households.”
He did not give any figures, but the trade ministry in February said it expected the economy to expand 2.0-4.0% this year, a bump from its previous forecast of 1.0-3.0%.
“We must brace ourselves and be prepared for a more difficult period ahead. And I want to be upfront with all of you so that we are mentally prepared,” he said.
Singapore, however, is dealing with the crisis from a position of strength because of policies it implemented in the past to build energy resilience, including being a major oil refining hub and energy trading centre.
Even if the Strait of Hormuz reopens, a return to normal will likely not be immediate, Wong warned.
“Ports and energy infrastructure have been damaged. Shipping lanes will need to be cleared of mines,” he said.
“Confidence must be restored that it is safe for ships to sail through, that insurance can be obtained, and people are prepared to take risks to go through the Strait.”
