Singapore’s plan to reduce its reliance on foreign workers could limit its growth and competitiveness, according to a recent report by the International Monetary Fund (IMF).

The fund said the country’s efforts to restructure its economy by boosting productivity and limiting the amount of cheap foreign labour could eventually set the stage for a long period of sustainable growth.

“Productivity improvements might take some time to materialise and may not fully offset the effects of declining growth within the labour force”, the IMF warned in its annual review of Singapore’s economic development and policy, adding that the measures Singapore implemented that tightened the labour market and increased wages have fueled inflation.

The fund also highlighted the challenges that lie ahead, including a slowdown in the expansion of trading partners and global market volatility. The island country is particularly vulnerable to external risks triggered by the long economic downturn in developed countries and emerging economies.

However, the international fund thought highly of Singapore’s efforts to restructure its economy and keep core inflation in check.

Singapore’s GDP is forecast to grow by 3 percent in 2014 and 2015, with core inflation rising to 2.4 percent by 2015.

(Source: VNA)