As the Eurozone economy shrinks 0.2% in Q2 2012, fears of Europe sliding into a technical recession is escalating. Nonetheless, a recent Reuters report announced that Asia’s services sector is still showing signs of growth.
Rikvin is confident that this bodes well for the republic, as it enhances its role as a contributor and key player to Asia’s ascendance as the growth engine of the world.
Even as the manufacturing sectors of major Asian economies such as China and India witness slower-than-expected growth, the services sector in Asia are still resilient. China’s services purchasing managers’ index (PMI) was 52 last month, indicating growth. India’s PMI for services performed better, at 55, the highest in the last six months.
Closer to home, Singapore’s services sector grew by 6% year-on-year (y-o-y), according to figures recently published in the Q2 2012 Quarterly Business Receipts Index (QBRI). While the health and social services industry grew by 9.2%, the highest incremental growth of 13.6% was witnessed in the education industry.
“On the back of lower PMI performance even from resilient economies such as Germany and France, the services industry in Asia is expected to take a hit too. Overall, the Asian economies are benefiting from strong fundamentals, and policies to accommodate decreasing exports,” said Mr. Satish Bakhda, Head of Operations at Rikvin.
Further analysis by Rikvin shows that while the services sector in Singapore is still going strong, a clearer outlook will emerge once recent measures effected by the government to limit the inflow of basic-skilled foreign workers in the services industry start to take effect.
In July this year, the Singapore government, has introduced changes in the dependency ratio ceilings (DRCs) and foreign workers levies in a bid to check the excessive growth of basic-skilled foreign manpower in Singapore, which has inadvertently depressed the wages for Singaporeans. This move came in between the introduction of higher requirements for the Singapore work visa as well as the higher thresholds for familial privileges under the Singapore Dependant Visa framework.
In addition, there are reports of a dearth of basic-skilled workers such as cleaners in some housing estates and F&B staff in the hospitality sector. Last quarter, the services industry shrunk by 0.5% quarter-on-quarter (q-o-q). The business services sector, on the other hand, was up by 4.6% q-o-q; however the information and communications (-0.8%), and financial and insurance services (-1.1%) witnessed a decline q-o-q.
“We anticipate that Singapore’s pro-business and politically-stable environment, as well as world-class infrastructure will continue to attract investors or entrepreneurs. Such activities have a domino effect and open up more job opportunities for Singaporeans; at the same time, they enhance the economic pie by providing an avenue for skilled professionals to secure the Singapore employment pass,” concluded Mr. Bakhda.