Lee Hsien Loong-led Singapore’s People’s Action Party (PAP), which has governed the city-state since its independence half a century ago, has returned to power. But the margin of victory was significantly lower than the previous election, despite expectations that the ruling party would gain from how it steered the country through the coronavirus pandemic.
While the ruling party was widely expected to keep a strong majority in Parliament, it garnered just 61.24 per cent of the popular vote in an unprecedented election that was fought online and on social media.
“We have a clear mandate, but the percentage of the popular vote is not as high as I had hoped for,” said Lee in an early morning news conference after the ballots were tallied.
“The results reflect the pain and uncertainty that Singaporeans feel in this crisis -the loss of income, the anxiety about jobs, the disruption caused by the circuit breaker and safe distancing restrictions,” he added.
Singapore’s elections are closely watched for indications of policy direction in the city-state, often compared to Hong Kong as a global financial centre.
For example, after the PAP posted its weakest-ever majority in the 2011 election, policy shifted to include more healthcare spending and other social welfare measures.
This time, even as PAP held on to the two-thirds majority in Parliament, which allows it to push through constitutional changes, the opposition Workers’ Party made substantial gains. It secured 10 seats out 93, up from the six out of 89 seats garnered in the 2015 election.
“The results also show a clear desire for a diversity of voices in Parliament,” Lee said.
Even as analysts are expecting more policy changes to come, CGS-CIMB noted in a recent report before the poll, that Singapore’s general elections rarely impact the financial markets.
“Unlike in many other countries in the region where election results have investment implications given their perceived impact on a country’s stability and for politically-linked stocks, the correlation between Singapore’s GE and its economy is more spurious,” CGS-CIMB said. “However, in unprecedented times today, the market could be hungry for positive indicators.”
The population’s generalised anxiety amid the continuing pandemic and the ensuing economic downturn could shape policy direction; Capital Economics on Thursday estimated the city-state’s economy shrank by 15 per cent on-year in the second quarter. The data are due Tuesday.
Maybank KimEng estimated in a report before the Friday vote that 4 percent of Singapore’s total employment would be lost due to the pandemic, or around 150,000 jobs; the brokerage projected it would take Southeast Asia two to four years to see a jobs recovery.
Maybank KimEng cited data from the Manpower Group Employment Outlook Survey for the third quarter as showing the weakest hiring plans since 2009, with 38 per cent of 266 employers surveyed saying they expected to cut payrolls in Singapore.
Another hot button issue that has implications for economic growth, as well as foreign investment into the country, is immigration. It has been a divisive issue in the city-state and was a key driver of the PAP’s comparatively poorer 2011 election showing. The issue could rise to the fore now, amid rising unemployment rates.
As of the end of 2019, Singapore had a foreign workforce of around 1.43 million people, up from 1.36 million at the end of 2014, data from the Ministry of Manpower show, making up around 25 per cent of the total population of 5.7 million as of last year.
The relative ease of immigration in Singapore has been a key part of the country’s ability to attract foreign investment. In 2019, the city-state attracted $92 billion in foreign direct investment inflows, the fifth largest globally after the US, China, the Netherlands and Hong Kong, according to data from the United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report for 2020.
Restricting businesses’ ability to bring in foreign workers could slow investment and business expansion ahead, as the city-state could face labour shortages.
Nevertheless, Singapore’s economy may recover faster than regional peers from the pandemic’s effects due to the stimulus packages, noted Capital Economics.
“The key reason for optimism is the record size of the government’s stimulus package, which is equivalent to around 20 per cent of GDP,” Capital Economics said in a report, adding the government can “easily” afford further support.
“Record government support has enabled businesses and households to come through the crisis relatively unscathed which should allow spending to bounce back now that the economy is reopening” after the lockdown to prevent the spread of the COVID-19 virus, the report said. “The support for businesses, including tax deferrals, wage subsidies and working capital loans, has kept afloat many viable businesses that might otherwise have gone under.”
Among other measures, the government has pushed through spending to help offset rental costs for businesses, helped pay for businesses to adopt digital practices and e-payments, and provided funding for training for first-time job seekers and for supporting salaries of older workers.