To remain a leading global hub, the Republic must double down on targeted policy innovation, societal adaptability and visionary leadership.
https://www.straitstimes.com/singapore/sg60-the-future-of-singapores-economy
2025-08-13
By Dr Khor Hoe Ee
Former Assistant Managing Director at the Monetary Authority of Singapore
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As Singapore stands on the threshold of a new economic era, the central question is: What must we do today to thrive tomorrow?
Over the next decade, the global landscape will be shaped by rapid technological advancement, climate change, demographic shifts, geo-economic fragmentation, and geopolitical polarisation.
To remain a leading global hub and a resilient, vibrant society, Singapore must double down on targeted policy innovation, societal adaptability and visionary leadership.
A legacy of reinvention
Singapore has a long history of transformation. As a small island nation of six million people, its economic ascent has been propelled by strategic location, good governance and pragmatic policymaking.
From a bustling trading post in precolonial times to an independent state in 1965, Singapore swiftly industrialised by attracting foreign direct investment and leveraging low-cost labour for export-oriented growth.
In the 1970s, tightening labour markets and rising wages prompted a shift towards higher-value industries. Economic setbacks followed: oil shocks in 1975 and 1979, and a recession in 1985 due to eroded competitiveness.
Singapore responded decisively, cutting wages and rebounding swiftly. A similar resilience was seen during the Asian financial crisis in 1997-1998, and the global financial crisis a decade later.
Structural reforms in the 2000s diversified the economy into financial and business services, high-tech manufacturing and the biomedical industry.
Despite recent shocks – including economic disruptions due to the Covid-19 pandemic, higher global inflation and interest rates triggered by the war in Ukraine, protectionist trade policies and heightened US-China tensions – Singapore has responded by skilfully leveraging its fiscal buffers to turn adversity into opportunity.
Embracing technological transformation
Singapore now enters a critical phase of economic restructuring, driven by rapid advances in digitalisation and artificial intelligence (AI).
The advent of generative AI, process automation and robotics presents a powerful opportunity to boost productivity and efficiency amid rising costs, a tight labour market and an ageing population.
However, it also poses risks of widespread disruption to employment – particularly in middle-skill, routine and data-intensive jobs across manufacturing, finance, law, healthcare and transport. New entrants to the workforce will struggle to find employment in traditional sectors.This shift demands a deliberate and inclusive national response.
To maintain global competitiveness, the government must support both startups and incumbent enterprises in adopting emerging technologies and reshaping business models.
Despite recent shocks, Singapore has responded by skilfully leveraging its fiscal buffers to turn adversity into opportunity. PHOTO: ST FILE
Government agencies such as Enterprise Singapore and the Infocomm Media Development Authority should enhance funding and advisory services that help businesses embrace and pivot to digital and AI-augmented operations. Regulatory sandboxes and public-private test beds can help scale innovation while managing risk.
At the same time, Singapore must proactively upskill its workforce. SkillsFuture must evolve into a dynamic, AI-enabled platform that offers real-time, individualised reskilling paths aligned with fast-changing job market needs.
Workforce Singapore and tripartite partners should coordinate to deliver stackable skill credentials, apprenticeship programmes and career conversion programmes that offer portable skills across sectors.
Protecting displaced workers and ensuring that young graduates have meaningful pathways into the new economy are essential for inclusive growth.
Leveraging green growth as a strategic advantage
The global climate change agenda is not just a moral imperative, but a strategic opportunity for Singapore to lead in green growth.
Far from being a compliance exercise, the green transition is a source of innovation, investment and long-term competitiveness. As countries impose carbon pricing, border adjustment taxes, and stricter environmental, social and governance (ESG) mandates, early movers such as Singapore can gain significant strategic advantages.
Singapore should aim to be the regional hub for carbon services, including carbon credit trading, emissions verification, and green finance.
The Singapore Exchange and Monetary Authority of Singapore have been proactive in developing the regulatory framework and promoting sustainable finance, including green bonds, transition finance and ESG disclosure standards. Regional initiatives, such as Project Greenprint, can serve as models for digital infrastructure that enable reliable tracking of carbon emissions and sustainability metrics.
Domestically, Singapore must accelerate decarbonisation by investing in solar energy, green hydrogen partnerships, energy storage systems and circular economy practices. Buildings and transportation – two high-emission sectors – should be fast-tracked for transformation through innovation grants and building codes.
Climate resilience is equally critical. Defending coastal infrastructure and adapting to extreme weather must remain top priorities. Policymaking should align green objectives with commercial incentives to drive private-sector innovation and participation in the transition.
Strengthening regional integration
While Asia will remain the growth engine for the global economy in the coming years, the global trading system is being challenged by protectionist policies and the global supply chains that are reconfiguring in response.As in the past, the supply chain reconfiguration presents an opportunity for Singapore to play a facilitating and coordinating role.
Despite rising costs, Singapore remains a premier gateway to Asean and broader Asia. Deepening regional integration can mitigate domestic constraints and broaden opportunities.
Singapore should champion seamless cross-border data flows, harmonised standards for e-commerce, and interoperable digital payment systems within Asean. Its leadership in the Asean Digital Economy Framework Agreement can help shape future-ready trade infrastructure.
In professional services, Singapore’s legal, healthcare and education sectors can be further internationalised by forming partnerships and regulatory bridges with neighbours.
Additionally, Singapore can leverage its strengths in governance, dispute resolution and project finance to co-lead regional infrastructure development. Initiatives such as the Belt and Road – if aligned with transparency and sustainability – offer platforms where Singapore can serve as a neutral, trustworthy intermediary.
Building an inclusive and resilient society
A high-tech economy must not come at the cost of social cohesion. Technological and structural changes will exacerbate inequalities if left unmanaged.
As the gig economy grows and traditional employment declines, Singapore must fortify its social compact by revamping and enhancing the social protection framework to reflect new modes of work and emerging vulnerabilities.
Singapore must fortify its social compact by revamping and enhancing the social protection framework to reflect new modes of work and emerging vulnerabilities. PHOTO: ST FILE
Gig workers, freelancers and part-time workers require access to portable benefits including health insurance, Central Provident Fund-style retirement savings and unemployment support. The rise of platform work necessitates adaptive policy tools – such as centralised benefits administration and universal access to basic protections – while preserving flexibility.
Beyond labour reform, Singapore must address demographic pressures by empowering women, seniors and marginalised communities.
Family-friendly policies – including affordable childcare, parental leave and caregiver support – can enhance workforce participation and help reverse declining fertility. Age-inclusive hiring, flexible working arrangements and senior training programmes are critical to extend productive lifespans. The goal is a society that is not just future-ready, but also future-inclusive.
Redefining education
Singapore’s world-class education system has underpinned its economic success, but the education system must now evolve to keep up with the rapid rise of AI and digital technology, and their impact on the workplace.
The nature of work is evolving more rapidly than traditional curricula can accommodate. Success in the AI era will depend not only on technical proficiency and knowledge acquisition, but also on agility, creativity and the capacity for lifelong learning.
The education system must evolve to keep up with the rapid rise of AI and digital technology, and their impact on the workplace. PHOTO: ST FILE
Education must become more experiential, interdisciplinary and learner-centric.
Beyond academic rigour, schools should nurture curiosity, collaboration and ethical decision-making.Students should learn to be more discriminating in their consumption of news and information in the age of social media.Tertiary institutions must partner with industry to co-design programmes that equip students with evolving job market skills needed to operate in an AI-augmented environment.
Most importantly, learning must continue throughout life. Lifelong learning should be normalised through incentives, digital credentials and recognition frameworks that value all forms of growth.
Singapore has repeatedly turned challenges and adversity into opportunities and success – through industrialisation, globalisation, and constantly upgrading and moving up the global value chain.
The next transformation will be more complex andchallenging – balancing technological efficiency with social equity, environmental sustainability with growth, and geopolitical risk with regional cooperation.
The nation’s small size need not be a weakness, but a strength – enabling agility, precision and unity of purpose. With visionary leadership, an inclusive society and a willingness to adapt and innovate, Singapore can once again defy the odds.
The next decade offers not only challenges, but also an opportunity to write the next chapter of resilience, renewal and reinvention.
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The writer was chief economist of Asean+3 Macroeconomic Research Office (Amro) from 2016 to 2025, where he was responsible for country and regional surveillance, as well as related research activities, of the Asean+3 economies.
Prior to joining Amro, Dr Khor was deputy director of the Asia and Pacific department at the International Monetary Fund, overseeing the surveillance work on six Asean and 12 Pacific Island countries.
He was previously also assistant managing director at the Monetary Authority of Singapore,where he oversaw economic research, monetary policy, macro-financial surveillance and international relations.
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