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ICAEW South East Asia Economic Insight Report May 2013
ICAEW South East Asia Economic Insight Report May 2013
icaew.com/economicinsight
markets. In summary, demand appears to be flagging in most quarters of the global economy. In this report we consider the impact that loose monetary policy abroad may have on the stability of ASEANs growth and the regions asset markets.
0 03 04 05 06 07 08 09 10 11 12 13
Malaysia Singapore US
Germany
Japan
Source: SGX STI, IDX JSE Composite, SET SET50, MYX KLCI, PSE PSEi, HOSE VNI, Cebr
icaew.com/economicinsight
cebr.com
MAy 2 013
Singapore productivity
Singapore has been a remarkable economic success story since independence in 1965 as it managed to sustain high, if somewhat volatile, output growth even after its industrialisation. Looking ahead, the growth outlook has diminished so that a slower pace of expansion is expected. In terms of underlying causes, growth theory suggests that the amount of factors of production labour, land and capital as well as their respective productivities will determine output in the long run. To understand Singapores prospects therefore requires an understanding of these elements. A glance at Figure 3 showing labour productivity (ie, how much is produced per hour worked) by sector reveals interesting trends. Looking at the three main sectors construction, manufacturing and services we can see a decline of labour productivity that is evident across the economy. The fall is sharpest in the manufacturing sector, which had exceedingly high annual labour productivity growth rates in 2010. However, this was a fundamentally cyclical event as output had plunged during the financial crisis and the subsequent recovery boosted output per worker. In construction the pattern is less clear, but rates of -3.5% in Q4 2012 are well below the series average of +2.0%. Services have also seen erosion of labour productivity and for the economy as a whole output per hour worked was down 3.5% year on year in Q4 2012. Does this mean that Singapore has lost its edge and is doomed to gradual decline? Given the long-term nature of the productivity concept, such an interpretation would be premature. Figure 3 shows that the numbers are volatile in the short term and owe more to the business cycle than to fundamental shifts that can only be discerned over a longer time frame. Productivity will determine Singapores prosperity in future years, but its best looked at as an outcome of the economys structural transformation than a determinant itself. If Singapore manages to grow productive sectors with high value added then its overall productivity will rise. The latest figures offer a positive indication of this: the biggest improvement in Q4 came in finance and ICT, both sectors that promise to add substantially to the island nations productive capacity if they keep growing. Figure 3: Annual labour productivity growth in Singapores sectors
% 55 45 35 25 15 5 -5 -15 -25 09 Q1 Q4 Q1 10 Q4 Q1 Total Services 11 Q4 Q1 12 Q4
00 GDP
04
08 Difference
12
Manufacturing Construction
Source: Singapore Ministry of Manpower
icaew.com/economicinsight
cebr.com
MAy 2 013
Source: Valuation & Property Services Department of Malaysia, Bank of Indonesia, URA Singapore, Bank of Thailand, Cebr
Source: Singapore Department of Statistics, Bank of Thailand, BPS, Malaysia Department of Statistics, Philippines National Statistics Office, Cebr
icaew.com/economicinsight
cebr.com
MAy 2 013
Source: Cebr
MAy 2 013
Cebr
The Centre for Economics and Business Research is an independent consultancy with a reputation for sound business advice based on thorough and insightful analysis. Since 1993 Cebr has been at the forefront of business and public interest research. They provide analysis, forecasts and strategic advice to major multinational companies, financial institutions, government departments and trade bodies.
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