The service sector is primarily responsible for a 0.1-percent growth rate in the third quarter, counterbalancing setbacks in manufacturing output, according to the Associated Press. The Monetary Authority of Singapore intends to lower the value of the Singapore dollar to boost exports.
Singapore's central monetary authority adjusts the value of currency instead of interest rates to secure economic prosperity, but it remains questionable if such a strategy will be enough to improve the economy. Singapore went through a recession during 2008, but officials remain optimistic that a recovery is on the horizon. The central bank expects a robust recovery, with growth coming in at around 2.5 percent for 2015. GDP data for the third quarter comes in November.
A primary culprit behind the slowdown is lackluster growth from China, a vital market for Singapore. Further, the city-state's industrial performance dropped over the summer, with manufacturing and construction declining because of the Chinese downturn. Manufacturing suffered a 6.0-percent year-on-year fall in the third quarter, which is another factor dragging down Singapore's GDP prowess.
The economy has also seen dips in vital areas such as engineering, electronics and the biomedical field. More importantly, consumer spending displayed lackluster results, reducing the public's ability to inject more cash into the economy. With that, a long-term problem that will continue to plague Singapore is a tight labor market that restricts foreign workers from contributing to the economy.
Singapore suffers from a lethal combination of stringent labor rules and a lack of domestic employment. Moreover, analysts expect labor restrictions to grow tighter as local employment spirals downward. A primary reason for this is the lack of new workers filling vacant positions as older workers retire. Even though the domestic workforce more than doubled from 2011 to 2014, attributable to the entrance of more elderly people and women in the workforce, former Manpower Minister Tan Chuan-Jin stated that such a trajectory is temporary and unsustainable in the long-term.
The crux of the problem is Singapore's foreign worker cap that prevents more workers from entering the labor pool. The government recognizes this fact, but new Manpower Minister Lim Swee Say indicated that the current foreign worker cap would remain in place for the foreseeable future. A reason why such a policy remains unchanged is social attitudes toward foreign workers and foreigners in general. Non-Singaporeans undergo discrimination, with many believing that foreigners depress wages and contribute to public overcrowding. Regardless of the societal tensions, one cannot ignore Singapore's labor shortage, and for economic stability, they should allow more workers into the country.