TRANSFORMATION is the only way that Singapore can meet its “very ambitious” productivity growth targets, in order for businesses and workers to experience real growth, said Finance Minister Lawrence Wong in Parliament on Wednesday (Feb 28).

Singapore aims for annual growth of 2 to 3 per cent on average over the next decade, of which one to two percentage points should come from productivity improvements, said Wong, who is also the deputy prime minister.

“This is a very ambitious goal. Only a few countries at our stage of development have been able to sustain such high productivity growth,” he said in his round-up speech on the third day of the debate on Budget 2024.

This requires continual transformation, he said, adding that firms must learn new ways to do business, workers must learn new skills and embrace new technologies, and new sectors must replace declining industries.

Wong noted that one of three questions Members of Parliament focused on during the three-day debate was how Singapore can achieve better growth. The other two questions were whether enough is being done to help Singaporeans cope with inflation, and whether the country’s social support system is sufficient.

On inflation, he noted that high inflation is a global issue and not unique to Singapore. Inflation both globally and domestically had been “generally stable” pre-pandemic, but rose due to Covid-era supply constraints, exacerbated by Russia’s war in Ukraine.

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Still, Singapore’s inflation “did not reach the peaks seen in several parts of the world” due to effective monetary policy tightening. Wong estimated that the Republic’s core inflation would have been 6.6 per cent in 2023 – instead of the actual 4.2 per cent – if the Monetary Authority of Singapore had not acted.

Singapore’s inflation is coming down, in line with that in the rest of the world, but the government is still providing help in recognition of cost-of-living pressures, he added.

To West Coast MP Foo Mee Har’s worry that the support in Budget 2024 could drive rather than cool inflation, Wong stressed that the moves were designed carefully and tilted towards those with less. “There’s something for everyone... but we also don’t want to inadvertently stimulate demand too much and push up prices.”

But he stressed that ultimately, the best way to deal with inflation is for business and wages to grow in real terms. “To achieve that, we need better economic growth.”

This, in turn, must be driven by productivity. One key strategy is attracting high-quality investments to Singapore, as these “typically involve cutting-edge and innovative activities” that push productivity up, he said.

Another strategy is to maintain consistent and steady investments in research and development, which is why S$3 billion was added to the Research, Innovation and Enterprise 2025 plan in Budget 2024.

Addressing fears that Singapore will become a two-track economy of large multinationals versus small and medium-sized enterprises, Wong said it was better to see the economy as having two broad segments: outward-oriented and domestic-oriented.

Outward-oriented businesses are naturally more productive as they have to compete in the global marketplace, which is true of other countries too, he added. Yet, productivity in Singapore’s domestic-oriented sector lags that of other countries, which is why more must be done to support such companies to restructure.

“But we also have to be careful that government support does not inadvertently prop up outdated or unviable business models and hinder restructuring,” he said. That is why schemes are geared towards businesses which are prepared to change.

Even as the Republic pushes for productivity growth, however, the workforce must grow too. This requires foreign worker inflows to complement resident workforce growth.

In the coming decade, Singapore’s workforce is expected to grow by about 1 per cent per annum, in line with the needs of the economy, said the minister. Combined with productivity growth of 1 to 2 per cent, that is how overall growth of 2 to 3 per cent can be achieved.

He stressed that the aim is “not to chase after a target” but “to secure better outcomes for Singapore and Singaporeans”.

That is why Singapore is also introducing workplace-fairness legislation and investing in Singaporeans, including through Budget 2024’s “significant enhancements” to SkillsFuture to help workers upskill.

Acknowledging MPs’ suggestions to expand the scope of SkillsFuture changes, Wong said: “I appreciate the strong support and interest. The Level-Up programme is a significant new addition to our SkillsFuture system. Let’s make this move first.”

As for the third question of whether Singapore’s system of social support is sufficient, he noted continued efforts to enhance social safety nets. The minister gave an overview of moves in the “traditional pillars” of social support: education, housing, healthcare, work and retirement.

The latest addition to the system is SkillsFuture. This includes upcoming support for the involuntarily unemployed – which “is really more of a jobseeker support scheme than an unemployment benefit”, he added.

Singapore has not changed its ethos of social support, said Wong. “It is not just about giving handouts, but it’s about giving people a leg up.”

In a clarification question following Wong’s speech, Progress Singapore Party Non-Constituency MP Hazel Poa asked if the goods and services tax (GST) rate will be raised further from now until 2030 to fund higher expenditures.

To this, Wong replied that there is no need to further raise GST as the two-step hike – to 8 per cent in 2023, and 9 per cent this year– sufficiently closes the government’s funding gap up to 2030.

Beyond 2030, the government will assess then if additional revenues or tax changes are needed to close any funding gaps, he said.