Singapore’s growth at risk as global headwinds intensify

Productivity won’t pick up in the near term.

Singapore’s growth remains constrained by a complex interplay of cyclical and structural forces. According to Morgan Stanley, these forces cause the country to be less able to benefit from the global growth pick-up.

According to the report, the relocation of manufacturing capacity from Singapore has affected industrial production and non-oil domestic exports and the impact is likely to stay in the numbers until the base effects peter out next year.

The looming prospect of Fed tightening, coupled with local macroprudential tightening measures, have also taken the wind out of the leverage cycle. The property market and the construction sector are bearing the brunt of the collateral impact.

Policy-induced labour supply adjustments at home will also constrain potential growth in the near term until productivity picks up.

“Overall, we remain of the view that macro rebalancing to tap higher growth export segments/export destinations and improving productivity is the only sustainable panacea to raise growth prospects and rein in inflation, given the changes in the global economy and domestic issues such as an ageing population/stricter immigration policies,” noted Morgan Stanley.