Singapore’s Gross Domestic Product (GDP) looks set to be cut by 1% to 2% yearly if the demographic downtrend for its labor force continues unabated.
According to a report by Bloomberg, Singapore will face a similar fate as Japan, which has seen its biggest slump in the workforce in the past 10 years.
The predictions estimate that Singapore will face both pressures from a shrinking workforce and slower progress than its Asian neighbors in attracting labor to its market, which will likely cause it to shrink by 1.7% in the next 10 years through 2026 and by 2.5 percentage points in the next 10 years after that.
That’s the worst in a dozen economies according to a report by Louis Kuijs, the Hong Kong head of Asia economics at Oxford.
Immigration restrictions only partially explain why Singapore is experiencing a labor crunch.
Japan can keep its labor supply constant with efforts to bring women back into the workforce and by higher participation among senior citizens, but these effects will be short lived and will run out by 2027. It remains to be seen how Singapore, which already encourages maximum labor participation from both sexes and its senior citizens, can face the challenge.