[h=2]SG economy: Population increases and GDP growth[/h]
May 3rd, 2014 |
Author: Contributions
Here is a brief look at the efficacy of population growth in driving GDP
growth, a core strategy of the Singapore government. Using data from the World
Bank, the writer has charted the cumulative year by year changes in three
factors: GDP Growth, GDP per capita and Total Population and determine what the
correlation between these factors infers whether the population growth strategy
is really generating sustainable GDP growth.
From the chart, the simple observation is that population growth had indeed
generated relatively strong GDP growth for a high cost economy, averaging 5.6%
pa. But observe the trend of GDP per capita in relation to GDP growth. Up to
2007, the GDP growth had been in almost exact lock step with growth in GDP per
capita. It meant the economy had generated as much increase in output as there
was population growth. This was to be expected as Singapore had historically
grown in line with total factor input but not more because of poor total factor
productivity (IMF Report on Singapore August 2012).
Then from 2007 onwards, when population growth starts to accelerate, GDP per
capital has begun to diverge negatively from GDP growth. This is further
compounded by ILO Labour Force Participation estimates which rose from 70% of
total population in 2000 to 74% in 2012. It appeared that the economy was unable
to generate proportionately enough GDP growth to account for the increase in
population despite good headline numbers. Another way to put it was that the
increase in foreign workers and immigration did not justify the incremental
economic output this increase had generated. As shown by the table below, GDP
growth from 2007 may seem high but was slower than before 2007 despite more than
doubling the annual population growth rate.
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</tbody>
In 2006, the population was 4.4 million and the analysis infers this was
probably the optimum point beyond which the subsequent accelerated increase in
population did not really pay off. Over the time series of 13 years Singapore
GDP had grown by 73% while population by 34%. Then difference between these two
sets of numbers, suggest that Singapore’s GDP growth potential or natural growth
rate indeed ought to be 3% pa with limited population growth, as pointed by the
writer in a previous article (Singapore government – A ‘one trick pony’). Of course, the
natural growth rate can be affected by other non-labour factors such as
increasing capital input and productivity improvement or lack thereof.
Undoubtedly this is a rough and ready argument but the inference is that
efficacy of the FT policy seems to have peaked already in 2006 and the
accelerated increase in population from 2007 onwards is a policy of vastly
diminishing return.
=> Which shows that the real purpose of Ass Loon's "FTrashisation-at-All-Costs" is to ensure the "out-voting" of SGs by FTrash in the elections to perpetuate 1-Familee rule. How evil!
The other inference is that Singapore will probably sustain
growth at its long run potential of 3% -3.5%, with limited historical
immigration and not having to resort to the accelerated post 2006 FT policy to
generate the average growth of 5.2% pa since 2007. To most Singaporeans, that
extra 2% is probably not worth the infrastructure stresses, elevated cost of
living and socio-economic problems. Besides, one should not forget that, like an
addiction, the higher one flies with population growth, the greater the fall
when there is no more space or tolerance for it.
Dr. Feelgood did not mention “cold turkey” as a health warning, did he?
Rioting unpaid foreign workers, years of flat or negative GDP growth, draining
of our reserves to support the S$… anyone’s cup of tea? Better to take the pain
now than later.
Chris
K
* The writer holds a senior position in a
major global financial center bigger than Singapore. He writes mostly on
economic and financial matters to highlight misconceptions of economic policy
making in Singapore
Here is a brief look at the efficacy of population growth in driving GDP
growth, a core strategy of the Singapore government. Using data from the World
Bank, the writer has charted the cumulative year by year changes in three
factors: GDP Growth, GDP per capita and Total Population and determine what the
correlation between these factors infers whether the population growth strategy
is really generating sustainable GDP growth.
generated relatively strong GDP growth for a high cost economy, averaging 5.6%
pa. But observe the trend of GDP per capita in relation to GDP growth. Up to
2007, the GDP growth had been in almost exact lock step with growth in GDP per
capita. It meant the economy had generated as much increase in output as there
was population growth. This was to be expected as Singapore had historically
grown in line with total factor input but not more because of poor total factor
productivity (IMF Report on Singapore August 2012).
Then from 2007 onwards, when population growth starts to accelerate, GDP per
capital has begun to diverge negatively from GDP growth. This is further
compounded by ILO Labour Force Participation estimates which rose from 70% of
total population in 2000 to 74% in 2012. It appeared that the economy was unable
to generate proportionately enough GDP growth to account for the increase in
population despite good headline numbers. Another way to put it was that the
increase in foreign workers and immigration did not justify the incremental
economic output this increase had generated. As shown by the table below, GDP
growth from 2007 may seem high but was slower than before 2007 despite more than
doubling the annual population growth rate.
| 2000 – 2006 | 2007 – 2012 | |
| Average GDP Growth | + 6.0% | + 5.2% |
| Average Population Growth | + 1.6% | + 3.8% |
<tbody>
</tbody>
In 2006, the population was 4.4 million and the analysis infers this was
probably the optimum point beyond which the subsequent accelerated increase in
population did not really pay off. Over the time series of 13 years Singapore
GDP had grown by 73% while population by 34%. Then difference between these two
sets of numbers, suggest that Singapore’s GDP growth potential or natural growth
rate indeed ought to be 3% pa with limited population growth, as pointed by the
writer in a previous article (Singapore government – A ‘one trick pony’). Of course, the
natural growth rate can be affected by other non-labour factors such as
increasing capital input and productivity improvement or lack thereof.
Undoubtedly this is a rough and ready argument but the inference is that
efficacy of the FT policy seems to have peaked already in 2006 and the
accelerated increase in population from 2007 onwards is a policy of vastly
diminishing return.
=> Which shows that the real purpose of Ass Loon's "FTrashisation-at-All-Costs" is to ensure the "out-voting" of SGs by FTrash in the elections to perpetuate 1-Familee rule. How evil!
The other inference is that Singapore will probably sustain
growth at its long run potential of 3% -3.5%, with limited historical
immigration and not having to resort to the accelerated post 2006 FT policy to
generate the average growth of 5.2% pa since 2007. To most Singaporeans, that
extra 2% is probably not worth the infrastructure stresses, elevated cost of
living and socio-economic problems. Besides, one should not forget that, like an
addiction, the higher one flies with population growth, the greater the fall
when there is no more space or tolerance for it.
Dr. Feelgood did not mention “cold turkey” as a health warning, did he?
Rioting unpaid foreign workers, years of flat or negative GDP growth, draining
of our reserves to support the S$… anyone’s cup of tea? Better to take the pain
now than later.
Chris
K
* The writer holds a senior position in a
major global financial center bigger than Singapore. He writes mostly on
economic and financial matters to highlight misconceptions of economic policy
making in Singapore
