Singapore enters a long era of subpar growth
Surprise GDP uptick in Q3 is no cause for joy.
There was a time when Singapore was one of Asia's fastest-growing economies, but that era is now long past. Now, the bustling city-state has to settle with subpar economic growth, as firms grapple with the effects of domestic restructuring and lacklustre external demand.
According to a report by Bank of America Merrill Lynch, GDP growth will be at a mere 2% in 2016 and 2017, at the lower end of the government's targets.
"GDP growth will likely remain constrained by restructuring and stricter foreign labor policies over 2016-17. Slower labor force growth, with labor productivity growth not able to fully compensate, is reducing potential GDP growth closer to 2%. Labor productivity change averaged a disappointing -0.5% yoy in the first half of 2015, falling well short from the targeted 2-3% growth," BofAML said.
"We forecast GDP growth at 2% in 2016 and 2017, improving only slightly from 1.6% in 2015. We think labor productivity is unlikely to improve significantly and offset weaker manpower growth. Stricter foreign labor measures are also hurting private investment and business expansion,” said the report.
More From Singapore Business Review