A small problem in paradise

On the face of it things have never been better in the island State of Singapore. With GDP growth nudging upwards towards six per cent, inflation at 1.5 per cent and the number of its citizens living below the poverty line too small to compute, it can rightly lay claim to be East Asia’s only first world nation.

Public servants around the globe contemplating lay-offs and “doing more with less” would be interested to note that Singapore’s State employees received a year-end bonus – and if they were still dissatisfied enough to want to leave their well-paid jobs, an unemployment rate of  1.9 per cent ensures they would not have to look far to find another.

With exports at $412 billion running ahead of imports ($375 billion) and with a good balance of trading partners, things look set for another prosperous year – but are there any problems in paradise? Well according to some economists there is at least one.

They point to Singapore’s heavy reliance on services to keep the economy ticking over. These account for 73.4 per cent of its GDP, with industry making up the rest (26.6 per cent). Agriculture, despite heavy investment in cutting edge agrotechnology, does not register.

But even industry’s minor share is set to decline with news, just after Christmas, that factory output fell by 2.8 per cent in November, compared with the same month in 2013. It was the weakest showing of the year and fooled even the most pessimistic forecasts of 0.3 per cent growth.

As a result the Ministry of Trade and Industry believes the nation’s economy as a whole will grow more slowly during 2015.

Of course, as a major trading nation, Singapore cannot remain immune from the anaemic performance of most of the world’s leading economies and for the moment at least, the demand for its services – finance, insurance, transport and storage, remain strong.

A year ago, writing in Forbes Magazine, economic analyst Jesse Colombo predicted the Singapore economy was heading for an “Iceland-style meltdown”. That was fanciful; has not happened and well not happen.

However, much will depend on a continuing global recovery from the traumas of the past decade – and especially in the performance of the United States – on whether Singapore’s public servants get another Christmas present in 2015.