Chart of the Day: See how the services sector is risking Singapore’s economy

It was once a boon, now it’s a bane.

The services sector is traditionally the most stable engine of growth. However, as its growth slows, the sector is becoming the biggest risk to the economy, accounting for about 70% of GDP and total employment share in 2013.

According to a report by DBS, the existing labour crunch due to curbs in foreign manpower is taking a toll on this relatively more labour intensive sector. The total number of job vacancies in the economy registered 60,500 in 1Q14, a rise of 18.4% from the same period last year.

The labour crunch’s effect on the services sector would pose a threat to the medium-term prospects for the economy given its relatively large share in GDP and employment.

Here’s more from DBS:

The total number of job vacancies in the economy registered 60,500 in 1Q14, a rise of 18.4% from the same period last year (Chart 3). The ratio of job vacancy to unemployed person ratio has also spiked up to 1.33 in the first quarter, the highest since 4Q07. The labour market is extremely tight at present.

Lastly, construction sector growth has also moderated, to 5.0% YoY, from 6.4% in 1Q14. Both demand and supply side issues are at play. The tightening in foreign labour policy associated with the restructuring is having an effect here. The slowdown in the property market due to earlier cooling measures has also dampened prospects for this sector.

The economy continues to be weighed down by the domestic restructuring and external uncertainties. Manufacturing is in doldrums but the services sector is the biggest risk. We have downgraded our full year GDP growth forecast for 2014 to 3%. A marginal improvement to 3.6% is expected in 2015.