Mounting economic policy pressures shadow Singapore's new government

Short-term growth is clearly slowing.

The ruling People’s Action Party’s crushing election victory will not diminish the economic pressures that Singapore is currently facing, according to a report by Fitch.

The report noted that Singapore's traditional mix of paternalist politics and free-market economics will likely stay under pressure from structural social changes, despite the PAP’s landslide victory in the general election.

“The social pressures to transition the country's more laissez-faire economic model are unlikely to abate. Fitch maintains that these challenges are structural in nature and will not be resolved solely by fiscal policy in the short term,” said the report.

Fitch said that the PAP's victory is particularly notable because it comes at a time when the country is facing long-term challenges ranging from rising income disparity, aging demographics, and the need to raise productivity to boost long-term growth. 

After the 2011 General Election, the PAP has sought to address these challenges by introducing new social welfare and healthcare programmes for the poor and elderly, as well as limiting large-scale immigration to boost local employment.

“The governing party's election victory, therefore, will likely be seen as a mandate to continue the implementation of these new policies. That said, the city-state is well-placed to adapt to structural challenges,” Fitch noted.