Thursday, June 30, 2016

ASEAN - S'pore outpaces US and Britain in productivity growth

Singapore's productivity growth is often criticised for being lacklustre, but an economist from Oxford Economics said the country has done "remarkably well".

Productivity grew 1.5 per cent between 2000 and 2015, outpacing gains in similarly high-income countries such as the United States and Britain. The US recorded productivity growth of 1.2 per cent while the United Kingdom posted a 0.9 per cent expansion, said Ms Priyanka Kishore, lead Asia economist at the British-based global advisory organisation.

"Though Singapore is already a mature and urbanised economy with little scope for sectoral shifts to increase productivity, it has done remarkably well, comfortably outperforming other high-income economies in terms of percentage growth," she said.

She attributed Singapore's productivity gains to high household savings as a stable supply of finance is needed to invest in both physical and human capital.

She also noted that Asean countries have had "a very impressive track record in productivity over the last 15 years". Productivity in the region grew by 3 per cent a year between 2000 and 2015, 2 percentage points higher than the annual growth rate of Latin America and 1.44 percentage points higher than Africa's.

Ms Kishore, who is also an economic adviser to the Institute of Chartered Accountants in England and Wales (ICAEW), attributed Asean's productivity growth to several factors. The key one was the sectoral shift from agriculture to manufacturing and services. Citing Viet- nam's strong productivity growth, she noted employment in agriculture there has come down from 60 per cent a decade ago to 40 per cent now, with room to drop even more.

South-east Asia is poised for more productivity gains over the next five years, with Vietnam leading the pack, added Ms Kishore, who presented the ICAEW-commissioned report on the region yesterday to ICAEW members and members from other partner organisations.

"It is best placed in terms of urbanisation as well as working population. Its labour productivity is still low but we expect that to continue rising over the next five years, and that should enable a high productivity gain," she said.

Despite projected productivity gains, the short-term outlook for Asean is clouded by factors such as weak global trade. Ms Kishore added that limited monetary and fiscal stimulus can be expected, as most Asean countries except Singapore are facing an overall deficit.

While the report forecast robust growth in the Philippines and Indonesia because of healthy domestic demand and strong macro-economic fundamentals, it said Thailand's chronic political uncertainty could impact economic growth and Malaysia could come under pressure from falling oil revenues, high household debt and the ongoing 1MDB saga.

MS PRIYANKA KISHORE, lead Asia economist at Oxford Economics.

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