Despite still reeling from the COVID-19 pandemic, economies from around the world have a new uncertainty to manage – Russia’s invasion of Ukraine. On the surface, Singapore’s exposure to Russia and Ukraine seems minimal, with neither country registering as part of the top 30 trading partners for Singapore.
Nevertheless, the attack may still wide-ranging repercussions for businesses in Singapore. Here are 3 ways that Singapore businesses may be affected.
#1 Higher Inflation – As Oil And Other Commodity Prices Spike
As it is, inflation has already been creeping into the global economy. With Russia being the second largest oil exporter in the world, oil price is set to spike.
This will naturally impact companies in Singapore’s oil & gas sector. Beyond this, higher oil prices will also lead to higher inflation. This is because oil is a major input in any economy. It is used for energy production, majority of planes, ships and other vehicles still rely on it to transport goods, plastics that are found in many products, from electronics to fashion to construction products, are derived from oil.
Russia is also a top exporter of wheat and other commodities. Businesses that make use of such raw materials may face heightened price pressures.
Singapore businesses can expect even higher electricity and transportation-related costs, which have already been increasing recently. There may also be higher costs in general as wheat and other commodities see their prices inflate.
Read Also: Open Electricity Market (OEM) For Businesses: Can You Switch And How Much Can You Save?
#2 Supply Chain Disruptions
In recent years, the US-China trade war and COVID-19 has already underscored the importance for businesses to be prepared for supply chain disruptions.
While Russia and Ukraine are not major trading partners of Singapore, this invasion is serves as another reminder that we cannot take smooth trade between countries for granted.
With supply chains being disrupted, especially for certain types of raw material and products, inflation may also be further driven upwards.
#3 Tourism To Remain Deflated
Again, Russia and Ukraine may not account for a substantial portion of local tourism. Nevertheless, with airlines being re-routed and international conflict potentially escalating, tourism might be affected. Cost of air travel may also increase on the back of rising oil prices.
This might be déjà vu for local businesses. Just as the COVID-19 pandemic is abating, another uncertainty may keep the sector depressed.
Read Also: 3 Best (And 1 Worst) Performing Business Sectors For SMEs In 4Q2021
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