IMF flags structural drag behind low consumption share

Singapore's private consumption ratio is the lowest amongst a group of 31 advanced economies as structural factors weigh on household spending, the IMF said. Household spending has fallen 8 ppt since 1990 as structural factors weigh on demand. Singapore's private consumption ratio is the lowest amongst a group of 31 advanced economies, with structural factors weighing on household spending, the International Monetary Fund (IMF) said. Private consumption accounted for 38% of Singapore's gross national disposable income (GNDI) in 2024, down from 46% in 1990. The IMF's analysis found that Singapore's low consumption-to-GNDI ratio is "primarily a structural phenomenon,” whilst cyclical factors have a smaller role. "Structural, slow-moving" factors such as demographics, economic structure, and development levels are important drivers of differences in private consumption across advanced economies, the organisation said. Singapore's labour share ranked amongst the lowest in the sample and was 10 percentage points (ppt) below the average for the other advanced economies in 2024, making it the second-most important factor behind the country's lower consumption rate relative to peers. A one ppt increase in the share of labour compensation in national income is associated with a 0.44 ppt increase in the consumption-to-GNDI ratio, according to the IMF's preferred model. “This is consistent with Yoo (2021) and highlights that economies with large corporate sectors and a large share of foreign-owned multinationals have a smaller portion of resources that accrue to domestic households,” the IMF said. Singapore's high level of development also weighs on its consumption ratio. A one log unit increase in lagged real gross domestic product (GDP) per capita is associated with a 4.4 ppt lower consumption ratio in the preferred specification. The city-state’s role as a financial centre is another factor, with a one log unit increase in the IMF's financial-centre intensity measure being…