In an exclusive media interview with Singapore Business Review (SBR), DBS Group Research economist Irvin Seah put together 5 charts that shows the impact of ageing population and the Singapore economy is “at a crossroad”, hinting the need for for an important decision.
Below are the 5 charts with further in-depth explanation from States Times Review:
The first chart below shows the rate of GDP growth since Sinagpore’s independence. Recessions are coming faster and hurting Singapore’s economy more frequently in recent years, with Singapore spending more period in recession in the past 20 years to 1995 as compared to the preceding 35 years since Independence.
More worrying about Singapore’s economy is that the country has reached it’s population limit, and since Singapore’s GDP growth strategy as surmized by Singapore minister Lim Swee Say is having labour growth and productivity growth, the country cannot afford to take in more labour and increase it’s population further hence deepening it’s reliance on labour productivity.
However in a catch-22 situation, Singapore’s productivity growth is chamfered by the influx of foreign labour with unaccredited university degrees and sloppy quality of work. Singapore businesses welcome the foreign influx as these labour are happy to work below market rate, saving a company tens of thousands a month in overhead costs.
The second chart shows a persistent decline in total fertility rate. Again, with the upside limit of population increase, in the coming decade, Singapore will soon face a silver tsunami and be flooded with more elderly people with reduced working productivity that of a younger workforce. Singaporeans who wish to retire early may find their hopes dashed as the economy-oriented Singapore government need more people at work, the government will put in place more measures like raising CPF withdrawal age (which has already been raised from 55 to 65) and depressing CPF interest rates (CPF interest rate has stagnated at its historical low of 2.5% since 2005 – the longest period ever in Singapore CPF history) so Singaporeans cannot “earn too much” to exit the workforce at a younger age.
Chart 3 below shows a consistent increase in median age projection from 2010 to 2050. The resulting impact was as described above in Chart 2.
Chart 4 is dangerous. It shows a 3-fold increase of Old Age Dependency Ratio, with a third of the population reaching the retirement age of 65 within the next ten years. The scarier part is that the majority of those aged 65 and above will have to continue to work to keep Singapore’s GDP growth maintain at 0%.
Chart 5 shows an increasing amount of Foreign Domestic Investment inflows, but this is not good news because the majority of these FDI goes into the property market, hence pricing out young Singaporean families out. Mortgage debt in Singapore is among the highest in the world with the average debt servicing period at 25 years. The chart has not been updated for 2015’s recession figures when Singapore’s manufacturing sector collapsed.