Singapore Manufacturers Get No Reprieve on Labor in Output Slump

Singapore’s manufacturers aren’t catching any breaks. Industrial production has declined for three of the past four months amid faltering global demand, data released Monday in Singapore showed, and Prime Minister Lee Hsien Loong says he’s not ready to let up on foreign-worker curbs that have led to a labor crunch. “Nothing in the external environment suggests an improvement in the industrial production output,” said Irvin Seah, a Singapore-based economist at DBS Group Holdings Ltd. “The labor market will remain tight and mismatch in the labor market will continue to exert upward pressure on wages.” Lee is persisting with a plan to restructure the economy by slowing the inflow of cheap foreign workers and boosting productivity, which has raised business costs. That’s compounding the challenge for companies grappling with an uneven global recovery and, in oil-related industries, falling crude prices. Industrial production fell 1.9 percent in December from a year earlier, according to the Jan. 26 government report. Electronics output slid 2.4 percent and petrochemicals dropped 3.5 percent. ‘Significant Pressure’ “The slump in oil prices and also the very sluggish growth momentum from the global economy, these are cyclical issues,” Seah said in a telephone interview. “Some specific clusters would be under significant pressure” structurally from the labor curbs, including rig builders and construction firms that rely on foreign workers, he said. Lee’s administration has imposed higher levies for overseas labor and set tighter limits on employing non-Singaporeans in some industries. The next round of tightening is scheduled for July. “We have set our immigration policy for now, but will review it after a few years,” Lee said in response to questions from the public on Facebook Jan. 24. The government may have room to stick to its labor policies as price pressures elsewhere evaporate, according to Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd. Consumer prices fell for a second month in December for the first time since 2009, according to data compiled by Bloomberg. “It’s a very welcome relief that they can go on with the labor market streamlining policy without unnecessarily causing too much policy dilemma,” said Varathan. “They will not be pushing inflation unimaginably higher to a point where the MAS may have to react to inflation despite slow growth,” he said, referring to the Monetary Authority of Singapore. To contact the reporter on this story: Sharon Chen in Singapore at schen462@bloomberg.net To contact the editors responsible for this story: Stephanie Phang at sphang@bloomberg.net Rina Chandran

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