Silver tsunami: Ratio of dependents to working age population to rise sharply from 2015

Productivity is the biggest challenge.

Singapore needs to focus on its medium-term growth strategies, particularly on raising productivity amid the greying population and stricter immigration policies.

A report by Morgan Stanley reveals that the dependency ratio, or the ratio of dependents to working age population, will pick up significantly in 2015 and continue to rise sharply in the next decades after that.

Morgan Stanley adds that growth in working age population is likely to slow further and will pose a drag on potential growth. Without measures to aggressively increase labour inputs, the panacea for sustaining potential growth would be to raise total factor productivity gains. Yet, it may be difficult to fully close this growth shortfall so quickly.

In this regard, Morgan Stanley thinks deteriorating demographics likely point to a structurally lower potential growth trend until productivity catches up to close the gap.