FACTBOX-Key political risks to watch in Singapore
SINGAPORE, March 12 (Reuters) - Rich and orderly Singapore, a regional base for many multinationals and fund managers, is one of Asia's smoothest-running and least risky countries, and is rated triple-A by both Moody's and Standard & Poor's.
Economic growth is slowing, however, and anger over living costs, immigration, and income inequality that is among the most extreme in the developed world is a major challenge for the ruling party.
The trade-driven economy grew by 1.3 percent in 2012, and Singapore avoided a recession in the fourth quarter only as a result of revisions to data for the first nine months of the year.
Another year of lacklustre economic growth and elevated inflation is likely in 2013, as exports remain weak and rising rents and car prices continue to push up the cost of living.
A January defeat for the ruling People's Action Party in a by-election does not limit its near-complete dominance of parliament, but shows support is waning, especially among younger voters, and suggests a serious shakeup of the makeup of the legislature is possible in 2016 general elections.
RATINGS (Unchanged unless stated):
Immigration is the most inflammatory subject on the island.
In February, the government said Singapore's population of 5.3 million could grow by as much as 30 percent by 2030, mostly through foreign workers to offset a chronically low birth rate.
Thousands of Singaporeans responded by attending a peaceful protest, one of the largest demonstrations in half a century, an event notably for its infrequency rather than its ferocity.
Some Singaporeans feel they are being cut of the job market by immigrants, and on a small island where foreigners account for nearly 40 percent of Singapore's 5.3 million people, many worry that national identity is being eroded, and the country increasingly run for the benefit for expatriates.
For decades, Singapore has built its economy using cheap foreign labour and a consumer class full of foreign professionals, but now high prices are now disenfranchising many Singaporeans, who struggle on a gross median monthly wage of about S$3,480 ($2,800). High taxes have inflated the price of the cheapest new car to about S$120,000 and housing prices have doubled in a decade.
Inflation for full-year 2012 was 4.6 percent, much higher than the 2.5-3.5 percent outlook the government gave at the start of the year.
What to watch:
- Property prices. Private residential prices have risen nearly 60 percent since hitting a trough in the second quarter of 2009 in the aftermath of the global financial crisis, and Singapore in January unveiled a suite of new measures to cool its housing market that included higher stamp duties on foreigners buying homes in Singapore.
- The government is trying to address growing public discontent about migrant workers, as more Singaporeans feel foreigners are taking jobs away from them.
- New measures have been introduced to screen for better qualified semi-skilled migrant workers and differentiate privileges between citizens and permanent residents.
Prime Minister Lee Hsien Loong has removed unpopular ministers, tightened immigration, increased the supply of government-built apartments and introduced more cooling measures to help slow the rise in property prices.
Still, many voters are unhappy with the PAP. With anger rising over soaring living costs, reliance on foreign workers and a widening income gap, the opposition Workers' Party took the PAP-held seat in the Punggol East ward by a convincing margin of nearly 11 percentage points in the January by-election.
Nearly all media are state-linked and open dissent, a rare phenomenon, can easily fall foul of the government, but criticism of the PAP is growing on social media. While the chances of widespread disturbance, protest or a change of government in the short term are almost non-existent, the PAP must adapt to a society in which it can no longer assume approval.
What to watch:
- The PAP, co-founded by Lee's father Lee Kuan Yew, has ruled Singapore since independence in 1965 and markets will be watching how the party competes for the support of voters in a more open political environment. ($1 = 1.2493 Singapore dollars)
(Editing by Daniel Magnowski)