Introduction
Deglobalisation refers to the trend of declining cross-border trade, investment and economic integration. For a small and open economy like Singapore, which relies heavily on trade, foreign investment and imported goods and services, deglobalisation poses several threats. Chief among these are imported and cost-push inflation as global supply chains fragment and protectionist measures raise import costs, alongside weaker external demand for exports as global trade volumes fall. To manage these challenges, the government can adopt a range of monetary, supply-side and strategic trade policies to contain inflation and maintain export competitiveness.
A modest and gradual appreciation of the SGD
One key tool the Monetary Authority of Singapore (MAS) uses is its exchange-rate-centred monetary policy. In the context of deglobalisation, MAS can continue to allow a modest and gradual appreciation of the Singapore dollar to cushion the economy from rising import prices. As the SGD strengthens, the prices of imported goods and raw materials in SGD terms become cheaper, reducing imported and cost-push inflation. This matters greatly for a country that imports over 90% of its food and all of its energy. If global food or energy prices rise due to disruption or export bans, a stronger currency offsets some of the increase, lowering the cost of imported inputs and shifting the short-run aggregate supply (SRAS) curve to the right, easing inflationary pressure. However, the appreciation is kept modest and gradual to avoid harming export competitiveness. A sharp appreciation would make Singapore's exports dearer, reducing net exports (X-M), lowering aggregate demand and slowing growth. This policy therefore offers partial relief but cannot fully eliminate inflation, especially in the face of large global supply shocks.
Supply-side policies to strengthen resilience
Diversifying import sources
Given the structural nature of deglobalisation, supply-side policies are needed to build longer term resilience. One approach is to diversify import sources so that no essential good depends on a single country. When Malaysia imposed a fresh chicken export ban in 2022, Singapore faced a temporary supply crunch and responded by opening new supply lines from Indonesia, Thailand and Brazil. A wider network of partners reduces vulnerability to price shocks and supply disruptions. Diversification is not costless, however; sourcing from further afield raises transport costs, and establishing food safety protocols and arrangements with new suppliers takes time, while not all goods are equally substitutable.
Increasing domestic production of strategic goods
To complement diversification, Singapore has invested in increasing domestic production capacity for essentials such as food. Under the 30 by 30 goal, Singapore aims to produce 30% of its nutritional needs locally by 2030 through high-tech urban farming, hydroponics and vertical agriculture, reducing dependence on volatile global supply chains. Given limited land and water, this strategy is inherently constrained and can supplement but not replace global trade, especially for resource-intensive goods.
Investing in R&D to boost export competitiveness
To counter falling global demand, Singapore must keep its exports highly competitive and differentiated. Increased investment in research and development can promote innovation in advanced manufacturing, biotechnology, financial technology and green energy, creating high-value niche products that are less sensitive to global price competition. This shifts the aggregate supply curve rightward over time and helps restore export demand even in a fragmented global economy. R&D takes time to bear fruit and requires significant support and careful prioritisation, with no guarantee of commercial success.
Evaluative conclusion
In facing deglobalisation, Singapore cannot rely on a single tool. A modest and gradual appreciation of the SGD provides short term relief against imported and cost-push inflation but cannot fully eliminate rising prices. A comprehensive suite of supply-side policies, from diversifying import sources and raising domestic production to boosting R&D and export competitiveness, is essential to build long term resilience. While these measures may not fully reverse the effects of deglobalisation, they reduce the vulnerabilities associated with external shocks and provide a more stable foundation for sustained growth. Ultimately, for a small open economy like Singapore, the goal is not to turn inward but to adapt proactively to a more fragmented world while continuing to leverage global opportunities.