Chart of the Day: Shrinking population drags construction investment down

Construction’s share of GDP dipped to below 12% from 14% in 2013.

This chart from Deutsche Bank shows that the Singapore government's investments on construction continued to dip as the population declined for the past few years.

Residential construction investment may have bottomed, but according to Deutsche Bank, its rebound is likely to face demographic challenges in the medium term.

After sustained weakness since 2013, the construction investment share of GDP fell below 12% in 1H 2017, from 14% in 2013.

Singapore’s fertility rate remained well below the replacement rate of 2.1 for more than four decades now, at 1.2% in 2017. At such a fertility rate, Singapore would see its citizen population shrink from 2025, whilst the number of its working age population would decline from 2020.

In response, a Population White Paper released in 2013 referred to various policies to boost Singapore's population, which includes infrastructure spending and construction of quality housing that could have been a boon for construction investment.

However, the government refrained, no thanks to the popular sentiment against more open immigration policies.

Since 2013, the non-residents' share of the total population rose by 1.1 ppt to 29.8% in 2016, slower than the rise in the 2010-2013 period.

In 2017, the number of non-residents actually fell, guiding their share lower to 29.3%.