Published January 21, 2009

Many foreigners tipped to lose jobs

Credit Suisse estimates number could reach 200,000

By TANG WEN EN

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EXPECTED job losses will trigger a big drop in the number of permanent residents (PRs) and foreigners in Singapore, says Credit Suisse, estimating that the figure could rise to 200,000. And this will have a ripple effect on the economy, causing private consumption, employment and the property market to slide.

Of the 546,700 foreigners and PRs (which include foreign construction labourers) who moved to Singapore between 2003 and 2008, 89 per cent filled new jobs here. Losing these jobs would give them little incentive to remain.

In the services sector, Credit Suisse (CS) analysts reckon 50,000 jobs will be lost by foreigners and PRs this year and a further 50,000 next year. This equates to 40.5 per cent of the 247,000 services jobs filled by foreigners and PRs between 2004 and the third quarter of 2008.

Projections are similarly bleak for manufacturing, where CS forecasts the loss of 50,000 jobs in 2009 and 20,000 in 2010. This equates to 42.6 per cent of the 164,400 new manufacturing jobs filled by foreigners and PRs from 2004 to Q308.

In construction, 30,000 jobs filled by foreigners and PRs are estimated to be lost in 2010, a 40.9 per cent loss of jobs that were created from 2004 to Q308.

Job losses in the various sectors can be attributed to Singapore's skills dependency. The country's natural resources are scarce or non-existent and the economy is fuelled by people. As the global economy slows, fewer imports are consumed and fewer exports are demanded, reducing the employment needs of companies engaged in either.

Consolidation in financial services and business services, says CS, could also contribute to significant job losses in the services sector.

CS acknowledges that these estimates might seem harsh, and reasons that employment would still be above what it was at the end of 2006; the figures only indicate that the economy will lose as many jobs as it created in 2008 and a portion of the new jobs in 2007, which would be consistent with the fall in real output to a level between 2006 and 2007.

CS also expects departures to follow job losses with a few quarters' lag, which could ease a possible shock in the fall of the population.

CS says the exit of foreigners and PRs could cut the island's population by 4 per cent. And this will take a big bite out of the residential property market. It expects a 40 per cent drop in prices from their 2008 peak, as vacancy rates rise to an unprecedented 15 per cent. Additionally, the fall in capital values will make homeowners feel worse off, causing them to cut back on consumption.

According to CS research, the average pay in the services industry is higher than that in the manufacturing and construction industries, particularly in financial intermediation, where average monthly earnings were $6,768 in 2007, as compared to the average of $3,764 in manufacturing and $2,646 in construction. Job losses in services would therefore result in a more than proportionate fall in private consumption.

Furthermore, as foreigners and PRs leave, they will take their spending power with them, sparking a possible 1-2 per cent cut in consumption growth in 2009 and 2010.

The Singapore government is unlikely to create incentives for people, especially foreigners and PRs, to buy property, after ruling out measures to ease the housing slump, says CS.

According to a recent report by Citi Investment Research, tomorrow's Budget is unlikely to reinstate a deferred payment option for property.

Furthermore, Prime Minister Lee Hsien Loong has said the Budget is designed to 'protect jobs' and will 'introduce measures to help (viable companies) with their business costs'. As a result, Citi reckons any measures on property will likely focus on the commercial and industrial segments, not residential.

Singaporean citizens are not spared from the crunch. CS estimates that 100,000 of the jobs filled by Singaporeans from 2004 to Q308 might be lost, increasing the unemployment rate to 5.6 per cent from its relatively low 1.9 per cent in Q3 2008. It would be the highest level since 1986, where it peaked at 6.5 per cent.

In order to ease unemployment, the government has plans to hire 7,500 new teachers and 4,000 healthcare workers. However, CS believes that the government sector will probably be unable to expand by much.

And while the integrated resort (IR) projects might create up to 30,000 jobs in 2010, CS reckons that this would not substantially change market conditions for foreigners and PRs, not compensating for the predicted population loss.