Singapore economy constrained by labour policies, strong currency: Citi strategist

SINGAPORE - Singapore economy is constrained by its labour policies and a strong currency, Citi Private Bank investment strategist Ken Peng told a media briefing on Friday.

Mr Peng, along with the bank's Global Chief Investment Strategist Steven Wieting, was speaking at a conference on key investment themes for the second half of 2015. The conference was held in conjunction with the Bank's Global Investment Outlook Roadshow.

Citi Private Bank investment strategist Ken Peng. PHOTO: CITI PRIVATE BANK

"Policies for the local labor market has squeezed growth and profits in the past few years.

"This has gotten to a point where we're seeing both declines in employment and declines in industrial activity at levels last seen in 2009," Mr Peng said.

These factors have resulted in pretty sharp declines in the earnings per share of Singapore companies, he added.

Singapore's industrial production fell 2.3 per cent in May as it battled headwinds to growth from sluggish global demand, statistics showed, while the ratio of job vacancies to unemployed persons rose to a 17-year high of 143 openings per 100 job seekers in the first quarter.

Mr Peng also noted that Singapore's export competitiveness has been affected by the weakening of the Yen and Euro, and its currency strength relative to the other Asian countries apart from China. (Japan and Europe are top destinations for Singapore exports.)

He speculated that in light of the "weak" economy and the upcoming elections, the government might make changes to Singapore's monetary and fiscal policy before the elections.

"With inflation pretty low and additional pressure from the election, there could be a turn in monetary and fiscal policy as we move closer to the election."

Citi Private Bank Global Chief Investment Strategist Steven Wieting. PHOTO: CITI PRIVATE BANK

He noted however, that with the January 2017 election deadline not far away, there would be little time before then for economic policy changes to take effect.

Citi Private Bank's Mr Wieting added that it was important to assess Singapore's current economic conditions against its present level of economic development.

"Let's put this in perspective, this is a developed economy, these things are not the same thing as a catching up story (in a developing country)."