Analyst reveals 5 alarming domestic issues in Singapore

Singapore is at a 'turning point'.

According to Macquarie Research, Singapore is going through a period of modest economic growth, against a backdrop of slowing global growth, exacerbated by restrictive domestic policies on labour and real estate.

"As a result, the country is at a turning point on many fronts," said Macquarie.

With this backdrop, Macquarie outlined 5 key domestic issues in Singapore noting that such issues may take sometime to get resolved.

Here's more from Macquarie:

Rising costs are affecting Singapore’s competitiveness. A strong SGD policy has not effectively mitigated inflation, and has been painful for exporters. SME‟s are struggling, shutting down or moving out, raising deflationary risks.

Total factor productivity in Singapore has been weak at 15% level, compared to markets like Hong Kong, South Korea and Taiwan which range from 50-60%. This is the result of abundant low-skilled foreign worker supply over the past few years.

The tightening of immigration policy is forcing companies to rethink their business and invest more in technology to boost productivity.

Singaporeans have a low share of national income, which fell from c.74% of GDP in 1986 to 58% in 2010. This is a result of Singapore‟s “pro-MNC” model and the lack of support for the domestic SME sector since the early days of nation-building.

As a result, Singapore‟s Gini coefficient is vastly widening even as Singapore has achieved one of the highest GDP‟s per capita in the world.

Dismal ranking in Innovation Efficiency: Singapore is ranked only 121st globally despite scoring 18th for resources put in to grow Innovation.

Mr. Bhaskaran believes the education system needs to revamp. It is currently stressed by a low teacher-tostudent ratio and is grooming efficient exam-smart young adults which may not be equipped with the right critical thinking skills.

A weak creative environment adds on to that; Singapore ranks 109th globally for press freedom.

Additionally, a Competition Policy is in place, but not effectively implemented (Singapore ranks 31st globally for intensity of domestic competition).

Demographic challenge. Singapore has one of the lowest total fertility rates globally. Absent change, the natural workforce will decline from 2020.

Political succession planning. Prime Minister Lee has shared his intention to step down when he turns 70, which implies his retirement around 2021. People are watching who the new successor might be.