Monetary Authority of Singapore Highlights Need for Adaptation Amidst Economic Challenges
Singapore faces a “slower long-run growth path” accompanied by higher costs, according to the Monetary Authority of Singapore (MAS) in its latest macroeconomic review released on April 26. The report emphasizes that the country will need to adapt as resource constraints and cost increases become more significant in the years to come.
MAS projects that the country’s steady-state growth rate will be shaped largely by total factor productivity (TFP) gains moving forward. Singapore’s historical growth has been fueled by strong capital accumulation and, to a lesser degree, TFP improvements. However, sustaining such growth in the future will be more challenging, as unit labour costs may increase.
While Singapore has managed to sustain growth in real GDP per capita without a proportional rise in unit labour costs, this may no longer hold true in the future. According to MAS, the economy will likely face a slower pace of growth, making it more difficult to maintain the same levels of economic efficiency.
Over the past decades, Singapore’s capital stock has increasingly focused on information and communications technology (ICT) assets, reflecting a shift in investment priorities. However, moving forward, maintaining the country’s competitive edge will require further emphasis on productivity improvements to navigate these slower growth dynamics.
