Singapore enters a long era of subpar growth

Surprise GDP uptick in Q3 is no cause for joy.

There was a time when Singapore was one of Asia's fastest-growing economies, but that era is now long past. Now, the bustling city-state has to settle with subpar economic growth, as firms grapple with the effects of domestic restructuring and lacklustre external demand.

According to a report by Bank of America Merrill Lynch, GDP growth will be at a mere 2% in 2016 and 2017, at the lower end of the government's targets.

"GDP growth will likely remain constrained by restructuring and stricter foreign labor policies over 2016-17. Slower labor force growth, with labor productivity growth not able to fully compensate, is reducing potential GDP growth closer to 2%. Labor productivity change averaged a disappointing -0.5% yoy in the first half of 2015, falling well short from the targeted 2-3% growth," BofAML said.

"We forecast GDP growth at 2% in 2016 and 2017, improving only slightly from 1.6% in 2015. We think labor productivity is unlikely to improve significantly and offset weaker manpower growth. Stricter foreign labor measures are also hurting private investment and business expansion,” said the report.