- POSTED: 17 Dec 2013 22:35
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Domestic labour constraints are expected to limit the growth of Singapore's manufacturing and export sectors, said economists. This is even though the global economy is on a path to recovery.
SINGAPORE: Domestic labour constraints are expected to limit the growth of Singapore's manufacturing and export sectors, said economists.
This is even though the global economy is on a path to recovery.
But the city-state's position as a regional financial hub is projected to see a boost with more investments flowing into Southeast Asia.
And going forward, Singapore, together with markets in the region, can expect to benefit from stronger economic integration.
Chua Hak Bin, head of Emerging Asia Economics, Global Research at Bank of America Merrill Lynch (Singapore), said: “Singapore's economy benefits from a pick-up in global growth -- it has historically been fairly leveraged, but we don't think it will be as leveraged an upswing as in the past.
“There are growing concerns that stricter foreign worker policies are finally coming to bear, wage costs are rising, quotas are starting to bite, therefore it may hamper growth as well as investments."
In particular, the exports and manufacturing sectors are expected to take a hit.
Enrico Tanuwidjaja, vice president, economist (Southeast Asia), Global Markets Research at Nomura, said: “Manufacturing is likely to slow down because of labour supply constraints, and also adjustments in terms of its manufacturing processes.
“Singapore needs to realign itself with more higher value-added manufacturing exports. (Due to) the adjustment process (it) will take time for them to serve new markets that will require high value added-products, such as tablet computers replacing PCs."
Bank of America Merrill Lynch is expecting Singapore's GDP to grow by 3.2 per cent in 2014, compared to emerging markets in Asia, which are projected to expand by 6.4 per cent.
Meanwhile, integration through regional agreements like the Trans-Pacific Partnership and the ASEAN Economic Community could mitigate the slowdown in exports.
Enrico Tanuwidjaja said: "Singapore has a relatively small domestic market, so having more regional trade partners will broaden up the export markets.
“The government must balance between retraining some of the workers and reinventing some of the business orientation, and perhaps find a more palatable way to replace tightness in the labour market, so that they can benefit from the region.
“The deep financial market would withstand Singapore's stronghold as the SEA financial hub.”
However, economists warn that ASEAN markets may face growing competition for demand from the developed economies, particularly from other emerging regions like Central and Latin America.