efficient, but somewhat ‘boring’ country, to becoming the “Monaco of the East” – aplayground for the rich, a more vibrant cultural scene and tolerant society. Aftergoing through the post Asian crisis period of exceptional volatility, in whichSingapore’s long-term prospects were seriously in doubt, it truly seemed indeed, thatSingapore had entered another “Golden Age”.
End of “Golden Age” Surfaces Hitherto HiddenChallenges
The so-called Golden Age was brought to an end, initially by signs of an overheatingeconomy, and then by the global financial crisis which is still unfolding as we write.Despite arguments about the increased resilience of the Singapore economy postrestructuring, the reality is that Singapore has been one of the economies hardest hitwithin Asia in the current crisis, and amongst the first to declare a recession.Beyond the cyclical challenges, the current recession will probably bring to surface anumber of challenges that have been previously masked by rapid economic growth.While there may be no alternative for a small open economy like Singapore but tocontinue embracing globalization, it is still necessary to ask ourselves a fewquestions. First, what could we have done better? Second, what are the challenges of a post-crisis world? Third, how then policy can be fine tuned to tackle thesechallenges, to put future growth on a stronger, and more sustainable footing?
Post Crisis Challenge #1: The Demand Drought
The most obvious challenge in the post-crisis world will be the disappearance of demand that underpinned the Golden Age. Even if the global economy recovers fromrecession next year, we could see a protracted period of sub-par growth in thedeveloped world. This does not bode well for the export-oriented Asian growthmodel, least of all for Singapore, which is the not only the most open economy inAsia, but has also seen exports as a share of GDP increase the most amongst anyAsian economy in the recent years (Figure 3).
Figure 3. Singapore is not just the most open economy in Asia, buthas seen a largest increase in its share of exports to GDPFigure 4. NODX to Crisis-3 Stayed Stable at 30% of GDP Until 2007,While NODX to Asia and China has also declined
Export (Percent of GDP)
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007SG MY TH PH ID TW HK KR%
Non-Oil Domestic Exports (NODX) as a share of GDP
0510152025303540452003 2004 2005 2006 2007
Crisis-3 Asia China
Source: CEIC, Citi Source: CEIC ,Citi