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The Straits Times (Singapore)

Sub-par growth for at least 2 years: Tharman

Focus will be on long-term upgrading schemes, says DPM

THE global economy will see 'sub-par growth' for at least two years, said Deputy Prime Minister Tharman Shanmugaratnam yesterday, becoming the first minister to specify a timeframe for how long the economic slowdown could last.

'For at least two years, I expect we'll see sub-par growth,' he told reporters, noting that Europe is 'already in a recession', the US is seeing an 'upward blip' but will be a 'slow-growth economy', and China's economy is 'clearly softening'.

Official figures from the Ministry of Trade and Industry yesterday showed that Singapore's economy shrank 4.9 per cent in the fourth quarter of last year compared with the previous three months.

Overall, the economy grew 4.8 per cent last year and is expected to grow between 1 per cent and 3 per cent this year.

Asked about government preparations for a possible recession, Mr Tharman said Singapore will go for 'more intensive implementation' of long-term schemes to upgrade companies and workers, rather than 'short-term, counter-recessionary measures'.

'I don't think we want to try and offset every decline in demand. That's not the most efficient way of using your fiscal resources,' he told reporters on the sidelines of a company visit yesterday.

'Better to focus on the long term, implement measures that help companies and workers, and when you do that, it usually helps in the short term as well,' he said.

He emphasised that Singapore needed to focus on upgrading its economy and move to new products and services, and raise the quality of jobs.

Productivity improvement is the only way for wages to go up over time, he said, adding: 'There's no short cut.'

He spearheads a 10-year drive to raise productivity growth as a way to increase median monthly income to $3,800 by 2020.

As of last June, the median monthly income for Singaporeans and permanent residents was $2,633.

Analysts viewed Mr Tharman's emphasis on long-term productivity measures as opposed to 'short-term counter-recessionary' ones as an indication that the Government does not plan to reprise the Resilience Package of 2009, which involved the Jobs Credit wage subsidy scheme and the Special Risk-Sharing Initiative for bank loans to small and medium-sized enterprises.

The Government is not focusing on short-term measures because a sharp plunge has not yet occurred and what-ever recession that comes may not be as severe as the one in 2008-2009, they said.

'Sub-par growth is still growth. This is a very pragmatic approach,' said UOB economist Alvin Liew.

'It's always prudent for the Government to spend within its means. Providing subsidies breeds inefficiencies and you want companies to hire on a rational basis to expand business, and not because there's a backstop.'

DBS economist Irvin Seah said that measures to boost demand - like cash payouts - will add to inflation. The Government wants to avoid this, given that the expected 3 per cent inflation this year is almost double the 20-year historical average of 1.7 per cent, he said.

Mr Liang Eng Hwa, an MP for Holland-Bukit Timah GRC and deputy chairman of the Government Parliamentary Committee for Finance and Trade & Industry, noted that the Government was just starting its new term, 'on a clean sheet with almost no current reserves'.

It thus has 'fewer fiscal options available' if it wants to maintain a 'prudent balanced Budget', he observed.

National University of Singapore economist Shandre Thangavelu believes the Government will continue to pay attention to longstanding social needs even if it eschews counter-recessionary measures.

Social welfare policies such as the Workfare Income Supplement scheme to boost the incomes of older, low-wage workers will continue, he said.

Cai Haoxiang