The latest property curbs along with the tightened foreign worker policy are here to stay, as the Singapore government is now trying to increase productivity instead of the country’s population in order to drive growth, according to Bank of America Merrill Lynch economist Chua Hak Bin.
Chua added that although the government is expected to unveil stimulus measures to help ease transition pains, the country will still face prolonged high costs and slow growth amid global economic uncertainty.
“It’s probably not a good time to embark completely (on this) when the whole world is in a storm and you’re trying to force this structural change,” said Chua.
He also revealed that Singapore will likely face a technical recession in Q1 2012, and a 30 to 40 percent chance of negative growth in Q2.
He noted that the gradual slowdown implies that the country’s chance for a sharp V-shaped recovery is unlikely, as economic activity has not fallen from potential output fast and far enough to induce a quick rebound. The current foreign worker policy also hinders companies from fully capitalising on growth momentum.
“The point is that even after that negative quarter, when you do resume growth, it will not be as strong an uplift as we saw in the past,” added Chua.
After the watershed general elections in 2011, Singapore has tried to move towards a new growth model that highlights productivity-led growth, partly an acknowledgement of the previous population-led model’s limitations, said Chua.
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