Coping In An Age Of Uncertainty

Source : The Business Times, May 7, 2008

SO even accountants and auditors in Singapore are bearish about the economic outlook, joining a list that includes manufacturers and those in the services sector - just about most in the business community, it's safe to say. As number-crunchers with typically the early eye on the quarter's figures, accountants and auditors get a snapshot of the business climate, even if it's just within the microcosm of a company or two (their own or their clients). And a recent poll by the profession has found Certified Public Accountants (CPAs) to be less than upbeat about the economy and business in the quarters ahead; fairly anxious, in fact, about the US downturn and all the attendant uncertainty. That seems to be the prevailing sentiment all round.

Uncertainty is indeed the order of the day, even in today's relative calm and stability. The global financial markets are thankfully free of mayhem for now, but turmoil and upheaval - as the last several bouts in recent years remind - are always a trigger event away. The worst appears to be over in the prolonged credit crisis but already the doomsayers point to the flipside, saying that a restoration of order in the credit markets could also spell the premature end of reform efforts. For now, however, greater uncertainty lurks in the real economy, where fears and worries about a global downturn, led by a US recession, have been feeding pessimism in the business world and among consumers, even before the first negative numbers appear in the latest US statistics. That is not to dismiss the very real concerns about a US downturn, with resulting decreases in American consumption and investment, and knock-on effects on Asian exports; but economic uncertainty tends to breed bearishness (rather than bullishness, for one) and sentiment and expectations guide many a business investment (or consumer spending) decision. That leads, in turn, to a further decline in business and economic activity - in the US and in the Asian economies. And then there's the inflationary cost spiral and the surge in commodity and food prices in recent months. But while the external climate has been cloudy and choppy, things on the domestic front in Singapore have seemed healthy enough, with robust economic figures in the first quarter amid rising inflation. With such mixed signals, little wonder that the man in the street, including business folks, is left feeling even more uncertain about the economic outlook.

The policymakers here have spelt out the best and worst-case scenarios - all of which hinge heavily on the severity of the US downturn - and the prognosis is good. Brace for a rough ride, to be sure, but barring a full-blown economic storm, domestic fundamentals and regional support will prevent the Singapore economy from crashing this year, the central bank says. And a downturn that stretches into 2009 likely still means, in Singapore's context, growth at the lower end of the trend 4-6 per cent range. Awareness of the risks ahead is good planning, but excessive pessimism could sometimes just become self-fulfilling.