- Singapore has a constrained yet productive labour force.
- It has an impressive track record of capital formation.
- It is also making progress in harnessing technological progress.
- Total Factor Productivity picked up in 2024-25, accounting for more than half the growth outcome.
- We think ingredients are in place for productivity-led uplift in growth performance.
Related Insights
Click here to read the full report.
Having grown by 5.3% and 5.0% the last two years, respectively, and another year of good growth expected in 2026, is Singapore undergoing an uplift in growth potential? Usual concerns about aging, deglobalisation, great power rivalry, and climate change notwithstanding, Singapore’s economic track record in recent years has been impressive. But growing on the back of a favourable cyclical tailwind, from booming electronics exports demand for instance, is one thing. It is an entirely different matter to assert that the economy is undergoing a structural upshift in potential GDP growth rate. For an economy already characterised by one of the highest per capita income levels in the world, that would be a striking claim.
We see emerging supportive evidence. Potential GDP growth uplift typically comes from changes in demographic or capital formation trends, and also from productivity. Singapore has a constrained yet productive labour force, especially in manufacturing. While no general uptrend in labour productivity is visible, one sector is showing signs of promise. Over the past few years, productivity in the information and communications technology sector has picked up discernibly.
Singapore also has a track record of mobilising capital efficiently with a long-term investment horizon. FDI flows are running at twice the amount received a decade ago, with the 2024 flows reaching SGD192bn. Substantial amounts are being directed to Singapore’s manufacturing sector, especially electronics and pharmaceuticals. The key driver of FDI is however finance and insurance, underscoring Singapore’s prominent position as a global financial centre.
What matters even more than the efficient allocation of labour and capital for potential growth is moving up the ladder of technology adoption and innovation. In economics, this boils down to what is known as total factor productivity (TFP). TFP captures, in theory, the change in output that cannot be accounted for by the change in inputs of labour and capital. It measures the effects of changes such as technological progress and changes in the organisation of production. An increase in productivity implies that more output can be produced with the same or less inputs.
Singapore’s TFP, estimated by its Department of Statistics, points to a promising trend. Following a rather lacklustre period (annual average of 0.7% in the fifteen years prior to the pandemic), TFP has picked up in recent years, averaging 2.8% during the last two years, accounting for more than half the growth outcome. Given the buoyant trend in investments and ongoing technology adoption, especially related to artificial intelligence, we are hopeful that the trend would continue in the coming years. An uplift in growth potential would be a testament to long-term policy making in improving the capital stock, human capital, and harnessing technological progress.
Click here to read the full report.
Topic
GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates & Digital Assets)
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply. The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.
Related Insights
Related Insights
DISCLAIMER