Prime Minister Lee Hsien Loong said encouraging citizens to have more children is the biggest challenge confronting the island nation if it wishes to remain an economic juggernaut in the developed world.
The government hasn’t succeeded in impressing on citizens that “this is going to be a retirement home and not a vibrant city” if the population is unsustained, Lee, 60, said in an interview in his office in Singapore on Nov. 26. “We’ll be dealing with it over the next 10 years, and longer,” he said of the legacy of a falling birthrate.
Lee, in his ninth year as prime minister, plans to unveil a package of measures in January aimed at boosting the fertility rate from 1.2 per woman. At stake is maintaining the achievements of an economy transformed by the embrace of free trade, fostering of higher-value manufacturing and nurturing of businesses and services such as gambling and health care.
“You have to be able to institutionalize what we have achieved,” Lee said of the most important tasks for the country after its development under the leadership of former Prime Minister Lee Kuan Yew, his father.
While developed nations from Germany to Japan have struggled with falling birthrates, Singapore’s size — at 5.3 million on an island smaller than New York City — means it lacks the domestic demand that larger economies can stimulate to sustain growth. Non-oil domestic exports are equivalent to more than half of the country’s gross domestic product.
“It’s an issue which many countries are dealing with,” Lee said. “None of them have come to any very satisfactory solution because the trade-offs are difficult ones.”
More than four decades after independence, women in Southeast Asia’s only advanced economy are barely producing enough children to replace one parent. Policy makers have tried and failed to reverse the declining trend since 1987, and handouts of as much as S$18,000 ($14,700) per child, extended maternity leave and tax breaks have done little to sway Singaporeans to have more babies.
The government will debate its population policy in Parliament in January, Lee said in the interview. Areas being considered include priority housing for couples with young kids, paternity or shared parental leave, the defraying of childhood medical expenses, better pre-school and improved cash benefits for having children, Lee said in August.
The median age of Singaporeans will rise to 43.1 in 2020 from 37.6 in 2010, Bank of America Corp. analysts estimated in an April report. That compares with 23.9 in the Philippines, 31 in Indonesia and 28.4 in Malaysia at the end of this decade.
“It’s going to be tough, and we may only see a marginal increase in the birthrate,” said Chua Hak Bin, an economist at Bank of America who has studied the impact of Singapore’s immigration and foreign-worker policy. “Past attempts have met with little success. Without immigration and foreign workers, Singapore may suffer the same fate as Japan, which is a bleak outcome.”
Immigration has filled the gap for employers, a pattern that’s put strains on the housing market and public services. Singapore is host to 2 million foreign residents, compared with 3.3 million citizens.
Home prices climbed to a record in the third quarter, even after the government introduced six rounds of measures since the beginning of 2010 to rein in demand.
“We have had a property boom, almost a bubble,” said Lee, who previously headed the central bank, served as finance and trade minister and studied mathematics at the University of Cambridge. “It’s because liquidity is sloshing around worldwide and real interest rates are negative,” he said. “That’s a difficult problem for us on the overall property market.”
Singapore, which uses the exchange rate to manage inflation, probably won’t shift to an interest-rate regime to have more control over its borrowing costs, the prime minister said.
“It would be very difficult,” he said at his office in the Istana, which was constructed in British colonial days and renamed after self-government in 1959 for the Malay word for palace. “Our economy is so open. We are a financial center. For us to sustain high interest rates at a time where interest rates worldwide are at almost zero, I think is very hard. We’d be flooded with money.”
Via – Bloomberg
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.