Slower, but quality economic growth over next 20 years

A SLOWER pace of growth can be expected in Singapore over the next 20 years, with the economy projected to expand at about 2 to 3 per cent annually after 2020.

But there is a silver lining in this slowdown, according to the Government's new report on population issues facing the country that was released yesterday.

The growth would be of a quality that will allow the economy to stay competitive to create high- value and good jobs for Singaporeans amid a rising Asia, said Second Minister for Trade and Industry S. Iswaran at a press conference. The projection will also help ensure the country strikes a balance between staying dynamic and avoiding over-straining the economy with searing growth.

"It is a challenging but realistic forecast of what we can achieve based on our aspirations and our domestic constraints," said Mr Iswaran, elaborating on the White Paper on a Sustainable Population for a Dynamic Singapore.

"If we want to support the aspirations, then we need a certain level of growth that will ensure vibrancy, a certain pep in the economy to create more opportunities, not just for Singaporeans in terms of jobs but also for our businesses... A slower growth rate compared to the historical rates does not mean the growth cannot be one of quality," he added.

This vitality is imperative as the profile of the future workforce is set to change dramatically.

As Singaporeans become more educated, the number in white- collar PMET jobs will swell from half the workforce to about two- thirds by 2030. This means 1.25 million Singaporeans will be professionals, managers, executives and technicians (PMET), against 850,000 today.

Such jobs, said Acting Manpower Minister Tan Chuan-Jin, "come when you have good companies being here". "So we need to remain competitive, productive and attractive enough for them to exist," he added.

But the projected economic growth rate will not come easy, as two factors have to change: The labour force will have to expand slower, while productivity needs to rise faster than in the past.

If productivity is to grow 2 to 3 per cent a year, and the labour force, 1 to 2 per cent at the same time, Singapore's gross domestic product (GDP) growth will be about 3 to 5 per cent. But to expect productivity to rise at around 3 per cent is a "stretch target", so overall economic growth is more likely to be between 3 and 4 per cent from now to 2020.

And from 2020 to 2030, productivity growth is likely to slow to about 1 to 2 per cent each year, because high productivity is a struggle for mature economies.

In addition, Singapore's greying population means the labour force will inch up even slower, at about 1 per cent a year over the later decade. Together, these will result in an annual GDP growth of 2 to 3 per cent.

Said Bank of America Merrill Lynch economist Chua Hak Bin: "Businesses and Singaporeans will have to accept that 2 to 3 per cent is the new growth norm. This represents a balance between achieving economic dynamism and social cohesion."

But economist Yeoh Lam Keong, vice-president of the Economic Society of Singapore, believes the Government could further cut labour force growth.

"I don't think the difference in additional jobs created is going to be that significant relative to the crowdedness and difficulties with a bigger foreigner population."

Association of Small and Medium Enterprises president Chan Chong Beng said the slower growth and tighter labour force will be "tough on businesses", but agreed that it was necessary for the long term. "If we don't take this approach we will end up like Japan, with a shrinking workforce and a lot of industries affected. Then it will be too late," he said.