Chart of the Day: This is the sorry state of Singapore’s labour productivity

Will the economy deteriorate further?

It’s no secret that Singapore is grappling with mounting productivity issues. Analysts at BMI Research warn that the city-state’s labour woes will steadily dent competitiveness in the near-to-medium term, as the country continues to delicately balance its domestic economic restructuring and poor external demand conditions.

“The economy will struggle with competitiveness, particularly as Singapore has been unable to boost labour productivity over recent years. In the absence of stronger productivity gains over the next few years, Singapore could face a more serious deterioration in economic growth potential, at which point the broader economy's health could come into question,” BMI Research said. 

The report highlighted that employers in general will face thinning margins as they are forced to boost wages in order to maintain production, while manufacturers will struggle to maintain market share and move further up the value chain.

Despite these threats, Singapore’s robust economic fundamentals will keep its economy afloat in coming years.

“We expect well-targeted efforts by the government to pay off in the end, boosting both labour and capital productivity. While Singapore has undoubtedly moved on from its former period of consistently rapid (>5.0% per annum) real GDP growth, we continue to expect the economy to continue to expand at a rate that is among the highest in the developed world,” BMI Research noted.