In good times, governments have the luxury of fretting about an ageing population. In bad times, they start to worry about a vanishing one. Singapore, the beneficiary of a population that grew by almost a fifth during the economy’s recent fairytale years of high growth and low inflation, is undergoing a sharp reversal. Almost two-thirds of 796,000 new positions since 2003 were filled by foreigners, mostly in construction and financial services. Of them, 200,000 will leave by 2010, reckons Credit Suisse, causing the population to fall 3.3 per cent to 4.68m.
As harsh as that looks, the prediction implies that the economy merely gives up the jobs it created in 2008 and a portion of the new jobs in 2007. The reality could be far worse. Many expatriates took their leave during a shallow Sars-related recession in 2003, causing population growth briefly to dip below zero. This time, companies will cut deeper. Fourth-quarter gross domestic product contracted 12.5 per cent – the worst on record. The electronics assembly sector, accounting for two-fifths of non-oil exports, has been hard hit.
Data from CEIC, an Asian research house, suggest that unlike in previous slumps, labour productivity had already been declining long before this recession – as early as 2007. Employers may therefore turn a deaf ear to entreaties from the national wages council to freeze or cut salaries. The withdrawal of highly paid financial services workers will hurt output, as well as all the satellite industries – domestic helpers, taxi drivers and restaurateurs – that depend on them. UBS, part-owned by the Singaporean government, may be the only big foreign bank not shrinking with impunity.
Thursday’s budget should be a masterclass in pump-priming; the government has already changed a law allowing it to tap into managed reserves as a source of fiscal stimulus. But stopping the reverse diaspora looks beyond it.