3 per cent productivity growth figure ‘too early to cheer about’: Economists
REUTERS file photo.
SINGAPORE — Despite Manpower Minister Lim Swee Say’s announcement on Friday night (Nov 24) that productivity growth is set to exceed 3 per cent this year, economists said it is too early to pop the champagne as the upswing is mostly propped up by external demand.
Speaking at the Singapore Productivity Awards Gala Dinner on Friday (Nov 24), Mr Lim said because Singapore is not likely to see a net increase in total employment, “most, if not all of the projected gross domestic product growth of about 3 per cent, will come from productivity gains”.
“So in other words, this year, our productivity growth is likely to be more than 3 per cent,” said Mr Lim.
The positive figures are mostly driven by external demand, rather than efforts of the government, CIMB Private Banking economist Song Seng Wun told TODAY.
“On the whole, the global economy did better. In the United States, Europe, their economies did better. In Asia, propped by China, markets did well, so this stronger demand is reflected in Singapore’s output,” he said.
Behind higher-than-expected overall productivity growth, different sectors of the economy fared differently, economists noted.
“We have to bear in mind that (the overall growth) is led by the manufacturing sector. If you look at services and construction sectors, productivity growth remains pretty low and lacklustre,” said Maybank Kim Eng economist Chua Hak Bin.
IHS Markit principal economist Bernard Aw said: “Goods producing industries such as manufacturing has been providing the bulk of productivity growth, supported by a combination of higher output and reduced staff headcounts.”
On the flipside, the services sector on the whole – which includes food and beverage and business services – only had productivity growth of 1 per cent this year, said Mr Song.
The tale of “two halves” when it comes to Singapore’s productivity growth has previously been noted by Deputy Prime Minister Tharman Shanmugaratnam.
Singapore’s outward-oriented sectors such as manufacturing, wholesale trade and finance have been doing well in productivity growth, clocking 3.2 per cent per annum from 2011 to 2015, he said last year. They make up about 60 per cent of the economy.
In contrast, domestic-oriented sectors such as construction, retail trade and food and beverage services — making up the remaining 40 per cent of the economy — grew only 0.2 per cent in productivity per annum during the same period. These sectors even chalked up negative productivity growth of 0.6 per cent per annum between 2013 and 2015, he noted.
Economists had mixed views on whether strong productivity growth would continue into 2018.
Mr Song felt 2018 figures could surprise on the upside but for it to happen, “service productivity growth has to hit about 1.5 to 2 per cent”.
Maybank Kim Eng economist Lee Ju Ye felt productivity growth would “subside next year, in line with GDP growth’s moderation”.
“The government’s efforts to raise productivity would help, but it would probably take a while to see improvements in the numbers as the industry transformation maps are a long-term process and can’t happen overnight,” said Ms Lee.
The economists largely agreed with Mr Lim’s assurance that Singapore was not going through “jobless growth”.
In the first three quarters of the year, total employment (excluding foreign domestic workers) fell by about 20,000, but local employment grew by around 9,000 and is expected to be higher than the 11,200 recorded last year, said Mr Lim. The loss of 43,000 jobs in marine and construction affected mainly foreign workers.
Jobs are still being created, but would require very specific skillsets due in part to technological disruptions, said the economists.
In addition, companies looking to hire may be reluctant to commit and invest in full-time staff, as they are unsure if the upswing can be maintained, said Mr Chua.
“According to graduate employment surveys last year, a smaller proportion of graduates were able to get permanent jobs,” he said.
They encouraged workers to be on the lookout to upgrade their skillsets and look towards emerging industries for opportunities.
“We don’t know how fast or how deep an impact the shift in technology will do to demand. We should always ask ourselves if our jobs will soon be replaced by robots in the near future,” said Mr Song.
Mr Lim said productivity growth in Singapore should be pervasive, cutting across all sectors of the economy and across various levels of the workforce. “To sustain economic growth and improve local employment, we will have to keep breaking the productivity bottleneck again and again,” he said.
