Sunday, May 16, 2010

Troubles of the Governments

Nowadays it seems the governments worldwide are in trouble. The news over the past few days pointed to these many troubles.

The Brits have formed a new government under the Conservatives and the Liberal Democrats with David Cameron as the new PM, and many skeptics have cast doubts on how long this power sharing government would last. Of course, an immediate test will be how the Brits deal with the EU Directive that will impact on the hedge funds based in UK. I think the hedge funds in London will be shifting out of UK since UK will likely accede to some of the EU Directive.

Of course, the rest of EU is not in great shape either, with Greece in trouble and needed the rescue package from the rest of EU. Now that there is an EU bailout for Greece, Greece can start to investigate how its troubles first come about. Surely many, including the banks in US will be implicated in such investigations. Other than Greece, the other two EU members (Spain and Portugal) have decided to take some measures to prevent their countries from going down the same route as Greece. So there will be lots of budget cuts and tax increases. Not sure how these changes will impact EU in the long run. I pity Germany and the others, whose citizens need to co-share in the troubles of other EU members.

Nearer to home in Asia we have Hong Kong and Thailand in different degrees of problems. The Hong Kong people wanted to test the extend of their democracy, and I don't think the Beijing officials will be too please at such bold attempts. This 'election' test of Hong Kong is much milder compared to the troubles faced by the Thais. Bangkok is now a battleground, with reports of higher and higher casualties. Initially it was a report of 24 dead, but the number increases with each fresher report (it is currently 30 dead). It is a sad thing and I do hope the troubles there will stop soon.

All these make me wonder about the impact on Singapore's economy since it is primarily an export based economy. While it is true that many of these troubled countries do not form a large part of our economy (see report on Export Destinations by SingStats), there will still be impact on sentiments and possibly world demand as a whole. I am not sure if the official forecast growth rate of 7.0 - 9.0 % (see MTI report) will still hold true for the entire 2010.

Looks like after the many natural disasters, we have more disasters of man -man origins. Pity.

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