The world is facing a sharper trade-off between economic growth and inflation, with price pressures almost certain to last longer, Singapore Finance minister Lawrence Wong said in a speech in Washington.
Wong’s comments on inflation came in his first speech on the global stage since being named the leader of Singapore’s so-called fourth generation team that paves the way for him to become the country’s next prime minister.
Addressing the Peterson Institute for International Economics on Monday night, Wong said higher inflation has been induced by the pandemic and the war in Ukraine. He also said that the trend toward globalisation is ebbing, compounding the challenges to growth.
Singapore has enjoyed relatively brighter growth prospects than neighbouring countries in Southeast Asia, helped particularly by the return of demand after recent loosening of pandemic curbs. That’s allowed the city-state’s monetary authority to focus on combating inflation, by tightening policy last week for the third time since October.
“Clearly there are no easy answers,” Wong said. “Fiscal policy therefore has to play an important role. Part of this is about being able to respond more quickly with immediate stimulus when needed,” he said.
While it’s not possible for any finance minister to sustain extraordinary levels of spending over extended durations, Wong said fiscal policy has to be re-purposed in order to build “inclusive and sustainable growth” by investing in eldercare, healthcare, early childhood development or infrastructure, as well as education.
In the dialogue at the Peterson Institute, he also said that the US and China will generate better outcomes for the world by continuing engagement and finding ways to work together on issues that affect everyone. This would be better than trying to contain China’s rise, which will be difficult, ineffective and ultimately destabilising for all, including the US, he said.