Productivity growth improves this year to 3%

This article is more than 12 months old

As the economy recovers, productivity growth is set to reach about 3 per cent in 2017 - accounting for all, or almost all, the economic growth for this year, Manpower Minister Lim Swee Say said last night.

This will be the highest productivity rise since 2010, and a marked improvement from last year's 1 per cent growth.

Productivity growth ranged from -0.2 per cent to 0.9 per cent from 2012 to 2015.

The news comes as local employment growth strengthens, even as total employment this year is likely to remain flat or fall slightly, said Mr Lim at an awards ceremony for productive businesses, organised by the Singapore Business Federation.

Productivity growth is critical because without it, Singapore will lose competitiveness, and wages will stagnate, he said.

It also enhances the quality and attractiveness of jobs for locals, he added.

The Trade and Industry Ministry on Thursday upgraded its forecast for this year's gross domestic product (GDP) growth to 3 to 3.5 per cent, from an earlier estimate of 2 to 3 per cent.

Mr Lim said most, if not all, of this year's projected GDP growth will come from productivity gains, since total employment - the other component of GDP growth - is likely to be flat or negative.

While total employment fell in the first nine months of the year, this affected mainly foreign workers.

Local employment rose by about 9,000 in the same period, and full-year growth is likely to be higher than the 11,200 last year, Mr Lim noted.

Economists said it is too early to cheer, as it is unclear if productivity gains can be sustained beyond the current phase of the global economic recovery.

"As demand picks up in the early stages of recovery, companies can ramp up production quite easily without having to hire additional workers, especially in manufacturing, which is driving growth right now," said Maybank Kim Eng economist Chua Hak Bin.

It remains to be seen if firms can achieve this growth next year without more hiring, he said. Moreover, investments by firms - vital for future productivity gains - is not picking up, he noted.

DBS economist Irvin Seah said that while the tightened labour inflow has likely prodded firms into a lower reliance on low-wage foreign workers, it is hard to measure how much of the productivity gains is due to technology, and how much is from the global economic upswing.

He added: "More importantly, the productivity growth needs to translate into a rising real median income for Singaporeans."

Mr Lim lauded the manufacturing, finance, professional services and wholesale trade sectors for "good and improving" productivity. But other sectors such as food and beverage, admin and support, accommodation and retail are where the local share of employment continues to decline, he said.