Singapore Is one of the World’s Most Developed Nations Today

INTRODUCTION

Singapore is one of the world’s most developed nations today. Since Singapore is a small domestic market and faces scarcity of natural resources, it adopts free-trade agreements (FTA) with many trading partners such as China, Malaysia and Indonesia. Its open economy is heavily dependent on exports, particularly consumer electronics, information technology products, pharmaceuticals, and on its vibrant transportation, manufacturing, business and financial services sectors. (Forbes, 2016) Its high influx of foreign direct investments (FDI) also plays a major role in achieving economic growth.  

Due to the global financial crisis in 2008, Singapore’s economy shrank, but has continued to grow a year after due to great global demands. However, it slowed down in 2015 due to the contraction of manufacturing, oil and gas sectors. Singapore has also been facing negative inflation for two consecutive years but rose back to 0.9% in 2016. Even though Singapore is facing a slow growth in employment for the past few years, unemployment rate remained low.

This report focuses on Singapore’s economic performances over the last ten years, from 2006 to 2015, using the five macroeconomic indicators – real GDP, real GDP growth rate, real GDP per capita, unemployment rates and inflation rate.

PRODUCTION OUTPUT PERFORMANCE ANALYSIS

Real gross domestic product (GDP) is the final value of goods and services produced in a given year when valued at constant prices. It indicates the size of an economy and its level of production activities.

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Figure 1. GDP constant price. (n.d.). Retrieved February 4, 2017, from www.tradingeconomics.com

The graph above shows Singapore's real GDP between 2006 to 2015. Generally, we can see that the real GDP has increased significantly over the years. In 2009, there is a fall in the real GDP to 7052.30 SGD million due to the global financial crisis and the collapse of the investment bank Lehman Brothers in 2008 which led to a decrease in the global trade of 9% and hence, fall in production output in 2009. The real GDP then increased drastically in 2010 because of the increase in consumer demands. This led to an increase in production and increase in income, resulting in a more than proportionate increase in the real GDP via multiplier effect.

Real GDP growth rate is the annual percentage change of real GDP. It helps in assessing the performance of an economy from year to year. Positive GDP growth rate refers to an expansion in the economy. Negative GDP growth rate refers to a contraction in the economy, and if it lasted for at least two consecutive quarters, the economy has suffered a recession.

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figure 2. Singapore GDP growth rate. (n.d.). Retrieved February 4, 2017, from www.tradingeconomics.com

The graph above shows Singapore's real GDP growth rate between 2006 to 2015. Generally, we can see that the GDP growth rate has fluctuated over the years, going through a series of expansions and interrupted by short recessions. There was a large negative growth rate in 2009 in the aftermath of the 2008 financial crisis. The growth rate then reached a peak of 37.2% in 2010. This reflected that the economy bounced back with a strong recovery led by the rise in the industrial output. However, there was a slight fall in GDP growth in the late 2010 due to a fall in the value-added in manufacturing sector but increased again due to improvements in export demands. This led to a rise in output, resulting in increase in GDP growth rate.

Real GDP per capita is the ratio of real GDP to a country’s population. It tells us the average standard of living of the economy.

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figure 3. Singapore GDP per capita. (n.d.). Retrieved February 4, 2017, from www.tradingeconomics.com

The graph above shows Singapore's GDP per capita between 2006 to 2015. Generally, we can see that the GDP per capita has increased over the years. There was a huge drop in GDP per capita in 2008 and 2009 due to the global recession in 2008, resulting in a decline in real GDP. GDP per capita then increased tremendously in 2010 to 46569.68 USD due to the high real GDP in 2010 mentioned above. GDP per capita then continued to increase after 2010 due to the increase in real GDP via multiplier effect.

In response to the global financial crisis in 2008, Singapore’s government has implemented expansionary fiscal policy – Resilience Package which amounted to S$20.5 billion. One of the aims for this package was to increase expenditure on infrastructure. This caused the aggregate demand to increase, leading to an increase production output and a corresponding income.

Government has also set aside S$2 billion National Productivity Fund, introducing the Productivity and Innovation Credit (PIC) scheme to provide support to SMEs. PIC in 2014 has allowed firms to have more tax deductions to increase business capital spending such as investment in automation allows better and more production, leading to a fall in cost of production. Income will rise, resulting in higher real GDP and economic growth.

LABOUR MARKET ANALYSIS  

Unemployment refers to the total number of working-age people who are willing and able to work, are actively looking for work but have not found a job yet. Unemployment rate refers to the ratio of the number of unemployed to the number of people in the labour force.

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figure 4. Singapore unemployment rate. (n.d.). Retrieved February 4, 2017, from www.tradingeconomics.com

The graph above shows Singapore's unemployment rate between 2006 to 2015. Generally, we can see that the unemployment rate has fluctuated over the years. In the late 2007, there was a fall in the unemployment rate to about 1.7% as many jobs created and re-employment rate increases. Due to the global financial crisis in 2008, unemployment rate raised to a peak of nearly 3.5% in 2009. Workers who were previously employed faced loss of jobs and those who were already unemployed remained unemployed for a longer period. At the last quarter of 2009, we can see that unemployment rate began falling as more job opportunities were available, increasing labour turnover. Since 2011, Singapore’s unemployment rate has fluctuated about 2%.