4 Challenges to Singapore’s economic growth in 2018
From a small trading outpost to a world class financial hub, Singapore has seen rapid economic development over the past 50 years. But this development has come at a cost. Time and again, the nation has battled with various internal as well external challenges to arrive at an average GDP growth rate of 6.81%. Currently, the biggest challenge that Singapore has to deal with is that of an unequal society. The economic development has brought with it a major disparity in the incomes of Singaporeans.
Inequality is more or less a consequence of the economic development of Singapore. But in the long run, it is set to pose a challenge to Singapore’s economic growth. There are various other challenges that plague the growth of the Singaporean economy. Some of them are – an aging population, technology disruption, higher taxes, and a steady decline in the workforce. Let’s take a closer look at each of these economy challenges for Singapore.
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Aging population
One of the biggest problems the Singapore government is trying to deal with is an aging population. Statistics show that Singapore is aging at a rapid pace and is heading towards growing older faster than any other society in the world. As per the website of the Ministry of Communications and Information of Singapore, between 1965 and this year, Singapore’s population grew from 1.9 million to 5.5 million. However, the number of citizens aged 65 and above is increasing rapidly, as the population growth slows. The size of this group of citizens doubled from 220,000 in 2000 to 440,000 today, and is expected to increase to 900,000 by 2030.
In fact, There are numerous problems with having aging populations. The higher the number of senior citizens, the lower the number of people who will be in the workforce contributing to the economic growth of the nation. It will also reduce the number of people who would qualify for paying taxes to the Singapore government.
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Growing external challenges
Along with domestic issues, there are various external challenges that can prevent Singapore from achieving its full potential. Singapore sits astride three of the biggest Asian economies -China, India, and Japan. No doubt these nations provide Singapore with robust opportunities to grow and prosper, but they also pose a potential threat to the Singaporean economy. These Asian economies give rise to cut-throat competition that can affect Singapore’s prospects in multiple ways. As developing countries aim to become self-sufficient, they will try to reduce their dependence on other nations including China, Singapore, and Japan.
Ever since the global financial crisis, countries are focusing on trade protectionism. An article by the Lowy Institute explains this aptly when they say, “Trump administration’s approach to the World Trade Organization, for example, threatens to undermine its dispute settlement mechanism that is crucial in protecting smaller countries such as Singapore from intimidation by bigger economies. Some aspects of Singapore’s recent economic strategy will need to be review as a result. For example, its tax arbitration offer to multinational companies is now viewing with suspicion by large countries that Singapore depends on, as part of the global shift against Base Erosion and Profit Shifting (BEPS).”
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Technology disruption
The emergence of disruptive technologies is one of the biggest challenges facing by Singapore. The effect of technology on all industrial sectors is visible around the world. The emergence of technology has lowered costs and enabled more businesses to enter the global market. Whether it is in the manufacturing or retail sector, technology is taking over certain jobs. 3D printing and additive manufacturing are changing how factories are configuring. Retailers are shifting online to serve their customers. Today, you don’t even have to go to a travel agent for your flight and travel bookings. You can do that through travel booking platforms.
Yes, jobs of a routine-nature are eliminating. But, they will be replaced by newer, skilled jobs. Since new types of jobs are being created, Singapore will need to match up with a talented workforce to prevent unemployment and slow digitisation. Initiatives like SkillsFuture are the way to prepare the workforce for new jobs.
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Decline in local workforce
People create ideas and ideas lead to innovation. To maintain economic growth, Singapore needs a more productive and skilled workforce. Yes, businesses in Singapore do have access to a pool of local and immigrant talent. But, the growth of the local workforce is expected to slow down until 2020. You can attribute this speeding down to a low-birth rate and the growing ageing population. Churning out a productive workforce and providing quality education are major challenges facing by Singapore.
Since Singapore plans to harness technology to create more opportunities, it must train its human resources to take over the new jobs created in a digitised world. The education system needs to prepare children to think critically and out of the box. It must also promote undying motivation in students, so they live with a ‘never give up’ attitude. While SkillsFuture helps Singaporeans upgrade their skills, the nation also needs to remain open to skilled foreigners. Greater diversity brings in fresh ideas and helps in further innovation.
These were some of the deterrents the Singapore economy has to surpass to achieve its developmental goals.
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