On Thursday (19 Jul), well-known South-East Asian Economy reporter Michelle Jamrisko wrote an article for Bloomberg Entitled ‘Singapore’s Future Is Good, Not Great, Economists Estimate’
Jamrisko was referring to a report released the previous day by Oxford Economics which said that Singapore’s reliance on the manufacturing sector to support growth was no longer feasible as rising labour costs and aging demographics will have a weigh down effect.
In addition, Singapore lies against a backdrop of emerging Asian cities which are increasingly relying on their service sector to juice growth. “The Oxford report noted that the days when Singapore’s manufacturing competitiveness was self-evidently great are long over.”
The report predicted that Singapore will see “modest” growth in its manufacturing productivity through 2022. The sector employment, and exports, will be pegged to growth in world trade.
It also referred to an earlier report from DBS which predicted that Singapore’s long-term growth will be held down by “unfavorable demographics” to a level at about 2% to 2.5%. This is even though Singapore’s “appetite for cutting-edge technologies” could partially increase Singapore’s share of exports to the region.
Compared to the rest of the region, Singapore to cities such as Ho Chi Minh City which is expected to register an average growth at about 7.6%. In addition, their financial services are expected to rise by 10.6% while transport and communications will rise by 8.5% over the same period.
Potential Prime Minister Chan Chun Sing: a 2% to 3% growth rate is “rather depressing”
Earlier this month (4 July), Minister for Trade and Industry Chan Chun Sing said at the Public Sector Transformation Awards ceremony that Singapore’s economic growth is “rather depressing” at 2% to 3% a year.
“Many people say that we have reached a certain level of growth, that going forward, it will be 2 to 3 per cent growth on average. That sounds rather depressing. If it’s 2 to 3 per cent growth on average, what does it mean for the economy, what does it mean for opportunities for our people?”
The 4G leader said that the 3% was an average and there are sectors which are growing while there are also sectors which are declining. The role of the public service is, therefore, to enhance those fast-growing sectors while helping the contracting sectors.
“If each of us continues to aspire in our respective sectors to work on the plus 5 per cent, then actually there is no reason to believe that we will be always 2 to 3 per cent. I say this with a heavy heart because we should not get into a mode whereby we think that the average is sufficient”.
Retired banker Chris Kuan: “The preferred next PM still need to continue his On-Job-Training”
In a Facebook post on the topic, retired banker Chris Kuan said that “Chan Chun Sing contradicted not only the present PM but also the Sage of Singapore, the man just about everyone would have preferred as the next PM”.
“When wages are low, economic growth can be rapid, for example 8% during LKY’s days or today’s Vietnam. But as wages rises with economic advancement, income level becomes a drag. Hence the growth potential begins to slow, to 2-3% in the case of Singapore (and below that in the case of most Western economies)”.
“Of course we can try to get back to 5% GDP growth, Mr. Chan can tell every Singaporean to accept a 25% pay cut across the board and rents, utilities and services similarly reduced” Kuan joked before adding “Just be careful of those mortgages, loans, and retirement savings invested in stocks and REITs”.
He concluded that “a lot more OJT is required it appears”.
So, given that even prominent economists have said that there is a limit to Singapore’s growth, how well do you think that Minister Chan understands economics? Will he deliver on his plan to grow Singapore’s economy at more than 5%?