SINGAPORE - Private economists say Singapore's economy has the potential to expand faster than the Government's latest target of 2 per cent to 3 per cent growth in the coming years.
But they say the goal, outlined by Prime Minister Lee Hsien Loong on Sunday, is probably realistic given Singapore's policy choices and the uncertain global economy.
The country is also making a transition to an advanced economy, they added.
Speaking at the People's Action Party's biennial conference, Mr Lee said that the Government is no longer aiming for the "ridiculously high" growth of previous years.
A good pace would be 3 per cent to 4 per cent growth, he said.
As the workforce grows slower, even growth of 2 per cent to 3 per cent would be "considered good growth", Mr Lee added.
DBS economist Irvin Seah said yesterday that Singapore has the potential to grow faster, but it has implemented policies such as tightening the supply of foreign labour.
This will restrict growth.
"Thus, over the medium- term horizon, we can expect a growth pace of 2 to 3 per cent," said Mr Seah.
The uncertain economies of the United States and Europe could also affect Singapore's growth, said OCBC economist Selena Ling.
She noted that the Republic is also making the transition from a developing economy to an advanced one, so growth will slow to a more steady and sustainable level.
"For advanced economies, 2 to 4 per cent is an acceptable range," said Ms Ling.
Businesses will be hurt amid the slower growth, noted Mr Seah.
"Some companies that are not as productive will be out of the game; they may have to close down or relocate."
United Overseas Bank economist Francis Tan said that the muted forecasts themselves could lead to businesses cutting back investments.
"People will feel that even the Government is lowering expectations. It may cause smaller business owners to be more cautious about investing in capital," he said.
Mr Tan said that hotels and food and beverage outlets may still need to spend on capital to raise productivity and make up for the labour shortfall.
But manufacturers and exporters may be more cautious and look more closely at the world economy.
For workers, wage growth could slow amid the slowing growth, said Ms Ling.
But a mitigating factor would be the constraints on foreign manpower which could help the labour market to remain tight, she noted.
Investors could also be affected.
"If growth is slower, you shouldn't expect asset prices to grow at a breakneck speed," said Ms Ling.
In recent years, the Government has been forecasting slower growth as the economy matures.
The Economic Strategies Committee in 2010 set out a growth target of 3 per cent to 5 per cent a year up to 2020.
The Ministry of Trade and Industry's latest estimate for economic growth this year is about 1.5 per cent. Next year's growth is projected to be 1 per cent to 3 per cent.