Singapore's rocketing productivity growth rate predicted to lose steam soon

And analysts are getting afraid.

According to ICAEW, whilst Singapore’s public finances shine compared to its neighbours, the low tax rates and government spending are likely to rise to fund social welfare and healthcare requirements.

Also, Singapore’s high rates of productivity growth are likely to narrow, meaning standards of living will not continue to improve at rates seen previously.

Here's more from ICAEW:

Douglas McWilliams, ICAEW Chief Economist and Executive Chairman of Cebr said: “As Singapore has been so far ahead of neighbouring ASEAN countries in productivity, it will be very difficult to sustain these high growth rates, despite government measures to increase output. The outcome is likely to be that Singaporeans will have to get used to less noticeable improvements in quality of life.”

Across the rest of the region, demand for energy is growing at a faster pace than domestic production and continued economic expansion may well mean ASEAN economies becoming increasingly dependent upon international energy markets to meet their needs. This will mean countries are vulnerable to unexpected price movements which could have an effect on inflation. However, expected falling global oil prices between 2014 and 2016 – and the entrance of Iran into the global energy market - should help mitigate inflation in the region.

Food price inflation is also expected to rise in countries like Malaysia, Indonesia and the Philippines in light of the devastation of agricultural land in the Philippines because of typhoon Haiyan and the ending of food and fuel subsidies in Indonesia and Malaysia. However healthier global harvests have taken some of the strain off the global supply of food and this should help alleviate some of the food price increases seen in the past two years that have particularly affected the working and middle classes.

ASEAN governments are also expected to remain focused on reining in public spending in order to reduce debt levels and boost investor confidence in the region. This is the main reason why countries like Malaysia and Indonesia have progressively cut key subsidies in a bid to reassure investors of their countries’ financial credibility. However this means that there is a realistic risk of tax increases in the short term.

Mark Billington, Regional Director, ICAEW South East Asia, said “Responsible public finances, especially where public spending is concerned, is a critical issue for ASEAN governments. This is even more the case now that US monetary policy means nations in the region are competing for capital against developed markets offering better returns.”

“Though there may be some short term pain, the long term advantage is that by redirecting funds to long term infrastructure and capacity development – for example as in Indonesia – countries will be better prepared for long-term growth and prosperity.”