Government to declare fiscal deficit in Budget 2015 to boost sluggish productivity growth: Nomura

Productivity growth has been disappointing so far.

Singapore’s policymakers are expected to declare a fiscal deficit of 0.3% of the GDP to boost the country’s sluggish productivity growth, a report by Nomura revealed.

According to Nomura, productivity growth is increasingly becoming the main driver of GDP growth because of the tight labor market.

However, domestic productivity growth has been disappointing since restructuring began. Employment growth for 2014 slowed to 3.7% after hovering at about 4% since the restructuring began in 2010.

“As hiring locals becomes more challenging, employment growth will likely fall further. Unless policymakers ease restrictions on foreign labour, the burden of driving GDP growth will increasingly fall on productivity growth, which has been disappointing so far. The pressure to see more visible results from the productivity drive is therefore rising, and we expect Budget 2015 to announce another fiscal deficit of 0.3% of GDP to support the restructuring agenda of boosting productivity,” stated Nomura.