Singapore economy in structural change

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Singapore lion_©Arno Maierbrugger
At the crossroads: Singapore. Photo © Arno Maierbrugger

The economy of the small city state of Singapore, which in the first quarter of 2013 faced another contraction of 0.6 per cent on a year-on-year basis and 1.4 per cent from the final quarter of 2012, will not be able “to grow like before”, the country’s Manpower Minister Tan Chuan-Jin said at a recent conference.

The export-oriented nation has been struggling to uphold its export levels due to the global economic slowdown. Supply-side constraints for the electronics industry could further limit the pace of Singapore’s cyclical turnaround, and growth in the domestic economy may not match the behaviour that has characterised past upturns, economists say.

Furthermore, cost pressures could rise as the labour market is likely to stay near full employment. Singapore has also curbed foreign labour inflow to increase job opportunities for its citizens, a move that is diametrically opposed to the aims of the ASEAN Economic community with its idea of an open labour market in ASEAN.

However, the nation’s economy should see a modest rebound in 2013, although uncertainty regarding the outlook for global growth means the recovery could be choppy, the country’s central bank added in a report published on April 30.

The central bank said that a period of restructuring in Singapore’s economy also meant that companies would face pressure on their profit margins from higher costs stemming from wages and rents, and this could present a headwind.

Despite the uncertainties, the central bank is maintaining its full-year forecast for Singapore’s GDP growth at 1 to 3 per cent in 2013, with growth to be spearheaded by the manufacturing and services sectors. Hopes for the recovery are especially pinned on an economic upturn in China this year.

But inflation pressures are likely to pick up again.

“The price pressures certainly still remain latent. There’s still a tight labour market in Singapore and this puts pressure on nominal wage growth which could feed inflation over the rest of the year,” said Credit Suisse analyst Michael Wan.

 

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Reading Time: 2 minutes

At the crossroads: Singapore. Photo © Arno Maierbrugger

The economy of the small city state of Singapore, which in the first quarter of 2013 faced another contraction of 0.6 per cent on a year-on-year basis and 1.4 per cent from the final quarter of 2012, will not be able “to grow like before”, the country’s Manpower Minister Tan Chuan-Jin said at a recent conference.

Reading Time: 2 minutes

Singapore lion_©Arno Maierbrugger
At the crossroads: Singapore. Photo © Arno Maierbrugger

The economy of the small city state of Singapore, which in the first quarter of 2013 faced another contraction of 0.6 per cent on a year-on-year basis and 1.4 per cent from the final quarter of 2012, will not be able “to grow like before”, the country’s Manpower Minister Tan Chuan-Jin said at a recent conference.

The export-oriented nation has been struggling to uphold its export levels due to the global economic slowdown. Supply-side constraints for the electronics industry could further limit the pace of Singapore’s cyclical turnaround, and growth in the domestic economy may not match the behaviour that has characterised past upturns, economists say.

Furthermore, cost pressures could rise as the labour market is likely to stay near full employment. Singapore has also curbed foreign labour inflow to increase job opportunities for its citizens, a move that is diametrically opposed to the aims of the ASEAN Economic community with its idea of an open labour market in ASEAN.

However, the nation’s economy should see a modest rebound in 2013, although uncertainty regarding the outlook for global growth means the recovery could be choppy, the country’s central bank added in a report published on April 30.

The central bank said that a period of restructuring in Singapore’s economy also meant that companies would face pressure on their profit margins from higher costs stemming from wages and rents, and this could present a headwind.

Despite the uncertainties, the central bank is maintaining its full-year forecast for Singapore’s GDP growth at 1 to 3 per cent in 2013, with growth to be spearheaded by the manufacturing and services sectors. Hopes for the recovery are especially pinned on an economic upturn in China this year.

But inflation pressures are likely to pick up again.

“The price pressures certainly still remain latent. There’s still a tight labour market in Singapore and this puts pressure on nominal wage growth which could feed inflation over the rest of the year,” said Credit Suisse analyst Michael Wan.

 

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