Singapore's per capita GDP to surge 30% by 2020

The gap between Singaporeans' living standards and other ASEAN citizens will definitely widen - now isn't that something?

According to ICAEW’s quarterly Economic Insight Report, Singapore’s per capita income is expected to increase almost 30% by 2020 as a result of the combination of economic growth and low population growth. At the same time, the gap between Singapore and other ASEAN countries is expected to increase.

The ICAEW report Economic Insight: South East Asia, is produced by ICAEW’s economic partner Cebr (The Centre for Economics and Business Research). The report is a quarterly review of South East Asian economies, with a focus on the six largest countries; Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

It shows that even though GDP per capita rates across the region are expected to grow over the course of the present decade, the wide discrepancies in living standards between ASEAN nations will likely increase with the difference in annual GDP per capita between a Singaporean and an average ASEAN citizen growing from almost US$42,000 to nearly US$54,000. High population growth in countries such as the Philippines and Malaysia is likely to hinder higher per capita income growth rates, though there could still be an increase of over one third. Lower income economies, such as Laos, Cambodia and Vietnam, are expected to attain two thirds growth in GDP per capita by the end of the decade, with Vietnam achieving a similar per capita income level in 2020 as the Philippines has now.

“ASEAN nations will continue to do well by international standards, as investment and domestic consumption continue to fuel growth. While we believe that GDP per capita will rise across all markets, it should be noted that income per head does not take account of the distribution of wealth. Though GDP per capita is growing, and will continue to grow in ASEAN, it is possible that a large section of the population will not immediately benefit. However, consistently rising national output ultimately raises personal living standards,” said Douglas McWilliams, ICAEW chief economic advisor and chief executive of Cebr.

The rising importance of domestic markets has largely helped the region escape recession. Emerging markets will play an increasingly important role for ASEAN economies while demand from traditional customers from advanced economies is expected to take a back seat over the coming years.

However, growth in general is now slowing across emerging markets. Falling commodity prices and slowing export demand are prompting central banks to turn on the stimulus tap. In the second half of January alone, the central banks of Indonesia, Thailand and the Philippines have cut their policy rate. Exports are suffering in Asia and beyond, and growth is slowing faster than previous Cebr expectations.

“Emerging markets are affected by low Western demand, and the Eurozone uncertainty remains a throbbing headache for the world economy,” says Mark Billington FCA, Regional Director of ICAEW South East Asia. “We are not out of the woods yet. Singapore businesses need to make sure they act on the lessons learnt from the previous downturn and focus on sound financial management, while looking for new opportunities in other markets.”

Other predictions in the report include:-

Export growth is no longer the primary growth driver for some ASEAN nations
GDP growth in the Philippines and Indonesia is much less dependent on the global economy, with export/GDP ratio of around 30%. Unlike Singapore (over 208%) and Malaysia (almost 100%), the two countries are expected to have steady growth through a period of weak external demand. Vietnam’s export/GDP ratio is expected to triple from 1995 to 2014, as it is becoming increasingly attractive for makers of labour-intensive products due to rising wages in neighbouring China.

Public debt poses low risk for ASEAN nations
Unlike the Eurozone, United States and Japan, ASEAN countries have a relatively low debt/GDP ratio as well as a largely stable or declining outlook. Though Singapore has the highest debt/GDP ratio in the region, at 94% in 2011, more than half of public debt is held by the national pension fund as non-tradable securities. Malaysia’s debt ratio is 55% and expected to increase slightly, while Indonesia seems on track to lower its debt burden below 20.0% by 2016.

Darker clouds ahead for Singapore
Though Singapore’s unemployment rate is at a full employment level of 2.0%, a marked slowing of exports and a leading Purchasing Manager Index indicator consistently below the contraction point of 50, suggests that growth will slow considerably in 2012. However, the country’s strong manufacturing and services industries are expected to capitalize on rising prosperity in Asia in 2013.