No longer a tiger, Singapore’s new economy

JANUARY 10 — Growth. Singapore’s story, the story of our island nation over the past five decades is one of growth. Growth in terms of population, opportunities and infrastructure all underpinned by world-beating economic growth. 

For years, annual GDP growth figures nearing 10 per cent were the norm. A blistering pace of economic expansion was kept up through the 70s, 80s and 90’s. Even the Asian Financial Crisis registered only as a minor blip. The economy proved resilient even through the global financial crisis.The economy defied fears of a crash in housing prices and continued to deliver enviable growth right up to the beginning of the current decade.

But over the last few years, there has been a change.

While there’s certainly been no grand collapse (far from it) growth rates have struggled to get above 4 per cent for the last few years. 2015 and 2016 growth will likely hover at around 2 per cent.

Given the protracted economic slowdown, these numbers are nothing to be ashamed of but they are new for Singapore and very likely to represent a new normal. Even the Ministry of Trade and Industry has predicted growth will likely remain in the 2-4 per cent range for the remainder of the decade.

The tiger, therefore, is gone. Perhaps it has moved off to other parts of the world but the question for Singaporeans is what sort of economy will take its place?

Far from an abstract question of economics this is something we are all going to feel and face over the next months and years.

Lower growth broadly means lower profits, and fewer, tougher opportunities for business expansion. This translates to lower bonuses, fewer jobs as well as potential layoffs.

For now a labour crunch and anti-immigration measures will cushion local jobs but for student job seekers and those outside of skilled brackets, breaking into the job market will not be easy. Dramatic increases in salaries and packages are also going to be hard to come by.

However, for many ordinary people there are more than a few silver linings to a slow growth economy. Interest rates are likely to remain low, easing pressure on home owners. Cooling in the housing market will favour young people looking to get on the property ladder.

A general view of the financial business district buildings in Singapore on November 25, 2015. — AFP pic
A general view of the financial business district buildings in Singapore on November 25, 2015. — AFP pic

Inflation is likely to stay low so while we won’t be seeing our salaries rise dramatically, we also shouldn’t have to contend with painful price increases.

The other day I was helping a friend look for office space in the much sought-after Club Street area and I was surprised by prices that according to real estate agents, had reduced substantially over the past two years. For entrepreneurs looking for start-up space, this is good news.

At the very least, this new normal allows us to catch our breath, take stock and consider what sort of an economy and therefore what sort of a society we want to be.  The government itself has said the next few years will be a period of measured restructuring and rebalancing.

But this doesn’t quite account for the fact that growth is a defining feature of our nation. The ability to deliver higher and higher living standards, more opportunities and rising wages is part of Singapore’s essential social contact.

Now we find ourselves confronting a future as a small, mature developed economy with moderate growth; think Denmark, New Zealand or Ireland. So should we begin to expect the same sort of democracy and welfare protection? Or are going to fight for our growth? Given global constraints and an ageing population, that would be quite a fight.

Our geographic location, strong education base and cash reserves give us a chance to keep on a growth trajectory even in adverse circumstances.  But for real growth, we would need to either rapidly develop an innovative and globally competitive private sector out of the shadow of state-linked corporates.

In the past influxes of new Singaporeans with their labour and capital have allowed us to beat a low population growth rate but politically this may no longer be an option.

In terms of fighting to maintain high growth, none of the options are easy and they would all entail a breach of the former status quo but will this bring change to another defining aspect of the Singapore story — our social and political systems?

An era of low growth and calculated rebalancing would be unprecedented for Singapore. Singapore’s nature, its core DNA is as an entrepot, a place of opportunity, a place to make fortunes.

Globally our country’s name is a synonym for growth and forward momentum so this isn’t something we can just give up. So if our GDP isn’t rising fast, that growth will have to come from elsewhere.

Somehow we need to grow. Or we wouldn’t be Singapore.

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