Although still reeling from the COVID-19 pandemic, economies around the world are dealing with a new uncertainty: Russia’s invasion of Ukraine. At first glance, Singapore’s exposure to Russia and Ukraine appears minimal, with neither country fitting into the Singapore’s top 30 trading partners.
Nonetheless, the attack may still have broad repercussions for businesses in Singapore. Here are 3 ways businesses in Singapore can be affected.
#1 Rising Inflation – As Oil and Other Commodity Prices Soar
As things stand, inflation has already crept into the global economy. With Russia being the second largest oil exporter in the world, the price of oil is expected to skyrocket.
This will naturally have an impact on businesses in Singapore’s oil and gas sector. Beyond that, higher oil prices will also lead to higher inflation. Indeed, oil is a major input in any economy. It is used for power generation, the majority of planes, ships and other vehicles still depend on it to transport goods, the plastics found in many products, from electronics to fashion to construction products, are derived from petroleum.
Russia is also a major exporter of wheat and other commodities. Companies that use these raw materials may face increased price pressures.
Singapore businesses can expect even higher electricity and transport costs, which have already increased recently. There may also be higher costs in general as wheat and other commodities see their prices inflate.
Also read: 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 have already highlighted the importance for businesses to prepare for supply chain disruptions.
Although Russia and Ukraine are not major trading partners of Singapore, this invasion once again reminds us that we cannot take the smooth flow of trade between the countries for granted.
With supply chains disrupted, especially for certain types of commodities and products, inflation could also be pulled higher.
#3 Tourism will remain deflated
Again, Russia and Ukraine may not represent a substantial share of local tourism. Nevertheless, with the hijacking of airlines and the potential escalation of international conflicts, tourism could be affected. The cost of air travel may also increase due to rising oil prices.
This could be deja vu for local businesses. As the COVID-19 pandemic subsides, another uncertainty could keep the sector depressed.
Also Read: 3 Best Performing (& 1 Worst) Business Sectors for SMBs in 4Q2021
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