Singapore's economy is expected to turn in a much better performance in the second semester but the island's jobless woes are not going to ease anytime soon, recruitment agencies and economists say.
GDP shrank 11.8 percent in the three months to last year from the previous quarter, its sharpest decline ever on a quarterly basis. It was down 4.3 percent year-on-year.
The sharp contraction was largely caused by the SARS crisis that struck the city-state in March, dealing a severe blow to the multi-billion dollar tourism industry and related sectors.
Unemployment rose to 4.5 percent at the end of March from 4.2 percent in December and officials said this could deteriorate to 5.5 percent this year, a painful development in a society which once took job security for granted.
The proportion of white-collar professionals joining the ranks of the unemployed is likely to increase, reflecting the structural changes forced upon the city-state as it searches for a new growth formula.
"The situation is actually quite serious," said Paul Heng, managing director of NeXT Career Consulting, a professional career management firm.
"What is worrying is the majority don't have the skills for the economy that we are in now. Some of them have not bothered to keep pace with the changes in the economy and what they have is now outdated," he said.
"I hate to say this, but I can't see the light at the end of the tunnel at the moment," Heng said.
A pressing challenge facing policymakers is how best to deal with China's emergence as a manufacturing powerhouse, and the rising competition posed by neighbouring countries which have made public their ambitions to overtake Singapore as a Southeast Asian business hub.
"Singapore needs niches to set it apart from its competition and it has them, such as a stable government, all of which works in its favor," said a foreign analyst who has lived here for more than 10 years.
"But look at where the [foreign] investments are going now. How can a country like Singapore compete when those investments are going north?" he said, referring to Malaysia, China and other countries.
Singapore has sought to cut its heavy dependence on manufactured goods, particularly electronics, in recent years by pouring millions of dollars into the development of new industries such as biomedical sciences, which it has identified as growth drivers.
At the same time, authorities are also trying to inject more creativity into the local economy, an ingredient the government has acknowledged is vital if a flourishing culture of entrepreneurship is to take root here.
"The government has already admitted you are not going to get the sort of high growth that we had in the mid-nineties," he said.
Nizam Idris, deputy head of Asian research at IDEAglobal, said the local economy had seen the worst of the wreckage induced by SARS, but those hoping for a return to the era of double-digit growth would be disappointed.
For the year, the economy is still on track to grow but the expansion will likely fall at the lower end of the official forecast of 0.5 and 2.5 percent.