The Malaysian Reserve

Economists: Singapore’s future is good, not great

Singapore (Pic: Bloomberg)


SINGAPORE • Good, not great: That’s increasingly the economists’ take on Singapore’s longer-term prospects, from manufacturing to underlying economic growth.

Ageing demographics and rising labour costs will weigh on the city-state, which focused on a significant manufacturing sector to support growth, economists said.

Singapore stands out against a landscape of emerging Asia cities that are relying more and more on services to juice growth, according to an Oxford Economics Ltd research note released on Wednesday.

“The days when Singapore’s manufacturing competitiveness was self-evidently great are long over,” according to Oxford Economics.

“Singapore’s manufacturing sector faces both rising competition within the region and a risk of rising labour costs” from an ageing population and immigration restrictions.

While the Oxford economists see “modest” growth in manufacturing productivity through 2022, the sector’s employment will flat-line and exports probably will grow in line with world trade instead of outperforming.

The Oxford report follows a note earlier this week from analysts at DBS Group Holdings Ltd in Singapore, outlining the longer-term challenges.

Singapore will be “good, but no longer distinctive” through 2030, with unfavourable demographics holding down growth at about 2% to 2.5%, according to the DBS note, led by chief economist Taimur Baig.

That compares to an average 7.9% growth a year from 2018 to 2022 forecast for Ho Chi Minh City by Oxford economists. The city’s financial services is estimated to rise 10.6% and transport and communications 8.5% over the same period.

On the positive side, Baig and the DBS analysts do see growth-cushioning factors from the government’s healthy appetite for cutting-edge technologies, and in the potential to increase the share of exports to neighbours in the region, which has remained around 20% for the past 15 years, according to the note.