Annual growth of 3-5% good? Really?

Mellanie Hewlitt
Singapore Review
16 February 2005

To bring the Chinese New Year off to a good start, the Straits Times with much pomp and gusto today, reported in its Top Story that (drum roll please) projected annual growth of 3 to 5 per cent – can be achieved for the Singapore economy.

Is good news really so scant these days that the local government owned/run tabloid has to resort to this slanted reporting?

Even taking the “projected” figures at face value, a 3-5% annual growth rate for the economy will not in itself translate into more jobs, increased salaries and better times ahead.

Why you may ask? The logic is simple. Economists and analysts have conservatively estimated that a developed country like Singapore needs to
achieve at least 4-5 % economic growth on an annual basis just to maintain its status quo. Any thing less will not be sufficient to maintain current living standards and employement levels.

This figure (4% minimum) is primarily to cater to annual inflation (of at least 2% per annum for developed countries), increasing costs of living and most importantly, the entrance of new graduates into the labour market.

Even a 4% annual economic growth will not directly translate into a 1% increase in employment. Latest reports by Reuters indicate that unemployment rates have also increased.

Analysts have also concluded that punitive fiscal and monetary policies of the government which aimed at reducing real wage and cutting CPF, have eroded the buying power of the average consumer, further worsening an already weak domestic retail economy. Singaporeans are spending less amid concerns that a slower economy may restrain job creation and wage increases this year.

Perhaps the Straits Times and Mr Lim Boon Heng should be more discerning in it interpretation of government statistics.

With the above in mind, perhaps it is also a tad premature for Mr Lim Boon Heng to arive at the convenient conclusion that this 3-5% annual growth is “a good performance”, based solely on this statistical estimate.

Afterall, numbers by themselves are meaningless unless they are interpreted in an intelligent and objective manner. This is also what separates investigative journalism from propaganda tabloids.

We also append below some comments from internet forumers on this subject;

On this note, Singapore Review and its editorial staff wishes all its discerning readers a happy and prosperous 2005.

Annual growth of 3-5% good: NTUC chief
Straits Times
16 February 2005

Singapore’s economy may well move into a period of slower growth but labour chief Lim Boon Heng believes that ‘a good performance’ – projected annual growth of 3 to 5 per cent – can be achieved.

Union leaders were briefed recently that Singapore had moved from a period of high growth to one of slower growth, similar to the experience of other developed economies.

‘Therefore if we grow by 3 to 5 per cent, it will be a good performance,’ Mr Lim, the National Trades Union Congress secretary-general, said yesterday at a Chinese New Year lunch.

Although uncertainties remain, such as the rising ‘political temperature’ in North-east Asia, he was confident investments will continue to flow into the Asean region.

Speaking to members of the Singapore Maritime Officers’ Union, Mr Lim said that there was still work to be done in some sectors here, say civil aviation, to make them more competitive.

He cautioned, for instance, against the urge to increase fixed salaries for flight crew even though the sector is facing manpower shortages after the emergence of low-cost carriers.

Raising fixed wages may be a tempting option, but it would weaken the
competitiveness of established network carriers like Singapore Airlines, he said.

‘If the network carriers are to remain aloft in the long term, it would be
prudent not to push up fixed wages,’ he said, adding that they should increase variable wages instead.

‘Flight crews in Singapore must keep a keen eye on the wage costs of competing airlines in the region,’ he said.

‘Management and staff should also be strongly focused on maximising revenue, through delivering better services, and being more efficient in using hardware.’

Mr Lim was nevertheless optimistic about continued growth. Tough policies such as Central Provident Fund cuts and wage restructuring, had paid off.

He also sensed an improving mood among Singaporeans and noted that consumer confidence had returned.

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