SINGAPORE: Deputy Prime Minister Tharman Shanmugaratnam said Singapore's economic growth will be weak in the short-term mainly because of the gloomy world economy.
And the challenge for Singapore, he said, is to restructure its economy to ensure sustained growth over the long-term.
Mr Tharman, who's also Finance Minister, was speaking to reporters on the sidelines of a community event in his Jurong GRC.
Many countries in the world are now bracing themselves for the possibility of a "fiscal cliff" in the US.
This means a huge economic crisis may be looming for the US - if its deeply divided Congress is not able to come to an agreement.
Congress, which is made up of the House of Representatives and Senate, will still be controlled by two parties in the new Obama administration.
The Republicans regained control of the House, while the Senate is dominated by the Democrats.
Mr Tharman pointed out that even if the US gets past this hurdle, the bigger challenge is to put its mid-term budget on a more sustainable path for the years ahead in order to restore investor confidence.
He said: "That's what's necessary to really get the economy to restart. And it requires common ground to be found on both taxes and spending on the parts of the Democrats and the Republicans.
"The experience of the first term was one of intense partisanship. Hopefully in the second term, there will be a willingness to find common ground. The initial signs are positive but it's too early to say."
The effects of sluggish growth in the US and Eurozone are likely to cascade to Singapore, even though Mr Tharman said Asia continues to do reasonably well.
"Demand will be weak, but our real challenge in Singapore is in restructuring our economy. We've got to persevere in restructuring our economy so that we can get sustained growth over the long term, over the next five to 10 years based on productivity growth. That's the big challenge. Demand will be weak in the short term but it's not a fundamental problem for us because our unemployment rate is low, and that's the bottom line of the short-term. Unemployment rate is low, jobs are available and training places are available. Our real challenge therefore is to focus on restructuring our economy so that we can move one whole level higher - productivity, skills, expertise," Mr Tharman shared.
He said this means using management methods and technology to improve efficiency and productivity so that workers can get paid more.
"They can have more satisfying jobs and we can grow our economy without growing employment year after year, especially foreign employment. So we got to find the right balance. It's something that affects every sector of the economy. And, we look at the most developed countries and we can see how it's done. They too went through that transition. In some cases not very long ago, they went through the same transition. They ramp up on labour and they have to upgrade, do with less labour, but using technology and everyone playing that part, including customers, everyone playing that part. You can move up to a higher level. That way, our workers can get good wages, get good jobs," he said.
Mr Tharman added that the government will provide every form of support to help companies, especially small and medium enterprises, to make this transition.
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