Singaporeans urged to stop penny-pinching to boost growth

The country needs to rely on exports less.

Boosting domestic consumption could offset Singapore’s reliance on exports, according to ICAEW’s Economic Insight report. With ASEAN rates of saving higher than elsewhere and expenditure correspondingly lower, the onus is on policymakers to encourage household spending.

The report pinpointed five main issues that loom over ASEAN economic performance—low commodity prices, China’s slowdown, weak world trade, uncertainty over when the US Federal Reserve will raise interest rates, and lacklustre growth of major export markets. These issues have resulted in sluggish productivity growth that in turn is arousing concerns of even more declines in the region’s medium-term growth.

As such, now is the ideal time to create some distance away from raw materials and to take steps towards knowledge industries, higher-skill manufactures, and services. 

In this vein, Singapore is on the right track. The country’s tech sector is currently flourishing. Further, as the country enjoys low inflation coupled with wage growth, talent in Singapore’s knowledge industry can look forward to 2016 as their wages are expected to spike further by an annual 4.3%.

However, growth and productivity are still faltering. The ideal remedy is for policymakers to formulate measures that encourage the consumption by people who currently have a save more, spend less mentality.

As ICAEW South East Asia Regional Director Mark Billington pointed out, improving citizens’ social security coverage is one way of encouraging spending. This encourages consumer spending because citizens feel less pressure to save for old age.

Such programmes spell great potential for Singapore, a country where households currently hold 45% of GDP.