Why S'pore has to keep up its growth

Editorial, The Straits Times, 11 Dec 2012

THE argument that Singapore is in a position to ease off on its growth path has become fashionable in some circles. So, it called for no less than Prime Minister Lee Hsien Loong to disabuse advocates of the notion that having arrived at developed-nation status, Singapore might assume a permanent state of affluence, much like Nordic and Central European countries of comparable population size.

Singapore is increasingly affluent, but the moorings are not firm. At an Economic Society function in June, Mr Lee averred that Singapore had not gone for "growth at all costs" but only as a means of improving lives and achieving certain goals. Looking at it another way, Singaporeans cannot expect to live off the fat of the land if a prolonged recession occurred. They have to build up the ballast.

Last week, the People's Action Party's biennial conference was told why it would be folly to abandon established national strategies, among them sustainable economic growth that will allow the state to spread its largesse fairly. With its dependence on trade and labour mobility, Singapore's economic foundations are by no means impervious to forces of change. So, it is disconcerting there is a body of opinion which believes sub-optimal growth will not fracture society, as the nation has "arrived". The belief that a slower growth would ease social pressures and raise general contentment is not supported by the facts. Look no further than an old-money society like Japan.

But with every spike in inflation and asset rates and each new labour incident which accentuates uneasy feelings about foreigners, dissatisfaction grows. Such disquiet has to be managed sensibly. While acknowledging the root causes of unhappiness, it would be a leap of logic for dissenters to say high growth rates alone are responsible. Consider a scenario of zero growth, high unemployment and declining earning and purchasing power. Then, an outflow of dispirited young people would turn Singapore into an "old-folks' home", as PM Lee put starkly. This is happening in stagnating Ireland and New Zealand, where the exodus has alarmed their governments.

A maturing economy settles down to a sedate expansion once growth-busting fixed investments have run their course. Japan, Europe and the United States will be happy to have growth at all. Singapore's growth for this year will be around 2 per cent, or lower, against what the Monetary Authority of Singapore and the Trade Ministry set as a trend rate of 3 to 5 per cent. Singapore is looking at a sustainable rate of 2 to 3 per cent. Anything lower could leave many workers vulnerable if a downturn happened. Calls to curb the rate of growth should be seen in this light.