SINGAPORE has to become more efficient as it cannot count on a pickup in global growth to drive the economy, said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam last night.
He noted that economic restructuring and innovation will become more important in the push to raise productivity and incomes.
Mr Tharman said at the labour movement's May Day dinner: "We cannot count on global demand to pull ourselves along... Increasingly, in the years to come, we will have to grow by raising productivity." Growth in the advanced world may remain sluggish, he added, noting that some major economies have yet to see solid recovery six years after the global financial crisis.
The slowing labour force growth here means it will be more challenging to achieve even 3 per cent growth - within the 2 per cent to 4 per cent GDP growth range projected by the Government - said Mr Tharman. He was addressing about 1,600 guests, including government ministers, union leaders and company management at Orchid Country Club.
Foreign workforce inflows slowed from about 80,000 in 2011 to 26,000 last year. Although this was offset by more locals in employment, the trend may not continue as baby boomers retire and new cohorts entering the workforce shrink. Resident labour force growth rate is expected to be negligible beyond 2020.
To raise productivity, Mr Tharman said Singapore must restructure the domestic sector. It has seen only 0.8 per cent productivity growth per year from 2009 to 2014, compared with 5.3 per cent for export-oriented sectors.
"We cannot continue with this two-track economy indefinitely," he added. "It will otherwise mean that businesses in the domestic sector get squeezed year by year as costs go up faster than productivity.
"Or that wages get squeezed in a sector that in total still employs 60 per cent of our workers. We must avoid this."
Not every business will survive the restructuring. While the Government has been enhancing support for businesses and helping workers upgrade skills, letting market forces play out is the most important way the economy can become more productive, he said.
This means allowing more innovative and efficient businesses to gain market share, while others lose out.
But the slowdown is not necessarily a bad thing as it gives firms and workers time to focus on gaining relevant skills, Singapore National Employers Federation president Robert Yap told reporters.
This article was first published on Apr 30, 2015.
Get a copy of The Straits Times or go to straitstimes.com for more stories.