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SINGAPORE ECONOMY

Less than 5% of Singapore's land is used for agriculture. Tropical fruits, orchids, and vegetables are intensively cultivated; rubber and copra are produced; and poultry, hogs, and tropical fish are raised. There are no exploitable natural resources in the country. Its power is produced by thermoelectric plants, and water is supplied by a number of reservoirs. Singapore has a fine rapid transit system, good roads, a railroad that crosses the island, and a causeway carrying road and rail traffic to the mainland. Singapore's workforce is employed primarily in manufacturing, in the service industries, and in commerce, with a negligible proportion engaged in agriculture. The country has become a major center of international finance in recent decades. The economy slowed as a result of the Asian financial crisis of 1997–98 and the 2001 recession, but unemployment and inflation remained low. The increasing importance of China in manufacturing and finance, however, is seen as a threat to Singapore's future economic growth, and the nation has sought to develop its tourism industry (including casino gambling). Singapore is one of the world's greatest commercial centers, with a large, modern port. Commerce has historically been the chief source of income. For many years the largest importer in Southeast Asia, Singapore is a free port and an entrepôt that reexports more than half of what it imports, notably rubber, petroleum, textiles, timber, and tin. It also exports locally manufactured goods such as computers and telecommunications equipment, petroleum products, oil drilling equipment, plastics, rubber products, and processed food and beverages. The country imports most of its food. Singapore's chief trading partners are Malaysia, the United States, China, Japan, and Indonesia. With more than 300 factories and deepwater wharves, the Jurong Industrial Estate is Southeast Asia's largest industrial complex. It and the Changi International Airport are built largely on infill of marsh and shallow waters of the straits. The country has a number of large petroleum storage and refining facilities, and Keppel Harbor is one of the world's largest container-handling facilities. Development of the former British naval base at Sembawang on the Johore Strait as a commercial shipyard helped to enhance Singapore's status as a major center for shipbuilding and repairs. .UNEMPLOYMENT An economic condition marked by the fact that individuals actively seeking jobs remain un hired. Unemployment is expressed as a percentage of the total available work force. The level of unemployment varies with economic conditions and other circumstance

UNEMPLOYMENT IN SINGAPORE

Instead. Singapore Unemployment Rate averaged 2. However during the early 1990s.817 percent. unlike many other central banks such as Federal Reserve System or Bank of England. percentage of foreign workers are high value talent who are brought in to provide strong labour competition for Singaporeans.Unemployment Rate in Singapore decreased to 1. The act gives MAS the authority to regulate all elements of monetary.5 births/1. Therefore in 1970. it chooses to do it via the foreign exchange mechanism. As a result.000 population meant that its population replacement rate was among the lowest in the world. MAS does not regulate the monetary system via interest rates to influence the liquidity in the system. . As Singapore progressed. from 1986 until 2012. Unemployment Rate in Singapore is reported by the Ministry of Manpower.the Singapore government foresaw a possible labour shortage problem in the future. the demands of an increasingly complex banking and monetary environment necessitated streamlining the functions to facilitate the development of a more dynamic and coherent policy on monetary matters. Before its establishment. The MAS has been given powers to act as a banker to and financial agent of the Government. Monetary Policy The MAS was set up in 1971 to oversee various monetary functions associated with banking as well as finance. the Singapore government began to actively pursue foreign immigrants and expatriates to live and work in the country. shun. It does so by intervening in the SGD market.However. the Government decided to bring the regulation of the insurance industry under the wing of the MAS and in September 1984 the regulatory functions under the Securities Industry Act (1973) were also transferred to MAS. A significant. In April 1977. Singapore’s birth rate of 8. monetary functions were performed by government departments and agencies. The vast majority of foreign workers are cheap labour from developing Asian countries who occupy jobs that regular Singaporeans.5 Percent reaching an all time high of 6. Today. but smaller. This means that unlike many other central banks.0 Percent in March of 1986 and a record low of 1. the unemployment rate measures the number of people actively looking for a job as a percentage of the labour force.90 percent in the third quarter of 2012 from 2 percent in the second quarter of 2012. banking and financial aspects of Singapore. foreign workers comprise of 35. It has also been entrusted to promote monetary stability. Despite having one of the best mortality rates in the world. and credit and exchange policies conducive to the growth of the economy . Historically. This page includes a chart with historical data for Singapore Unemployment Rate. Singapore also has one of the lowest annual population growth rates in the world at 0. Singapore. the Parliament of Singapore passed the Monetary Authority of Singapore Act leading to the formation of MAS on 1 January 1971. In Singapore.4 Percent in June of 1990. . MAS is also the financial regulatory authority for Singapore.8 percent of the labour force.

MAS' Objectives    To conduct monetary policy and issue currency. and to manage the official foreign reserves and the issuance of government securities. and To build a cohesive and integrated organisation of excellence. The composition of this basket is reviewed and revised periodically to take into account changes in Singapore's trade patterns. Monographs The MAS manages the Singapore dollar (S$) exchange rate against a trade-weighted basket of currencies of Singapore's major trading partners and competitors. As supervisor and regulator of Singapore's financial services sector. The MAS publishes a semi-annual Monetary Policy Statement (MPS) in April and October which explains its assessment of Singapore's economic and inflationary conditions and outlook. and develop strategies in partnership with the private sector to promote Singapore as an international financial centre. securities and futures industries. To supervise the banking. futures and insurance industries. insurance. MAS manages the country's official foreign reserves and issues government securities. As banker and financial agent to the Government. It formulates and executes Singapore's monetary policy. MAS may also intervene in the foreign exchange market to prevent excessive fluctuations in the S$ exchange rate. and is allowed to appreciate or depreciate depending on factors such as the level of world inflation and domestic price pressures. Monetary policy is reviewed on a semi-annual basis to ensure that it is consistent with economic fundamentals and market conditions. It is also responsible for the development and promotion of Singapore as an international financial centre. This trade-weighted exchange rate is maintained broadly within an undisclosed target band. MASMission To promote sustained non-inflationary economic growth. thereby ensuring low inflation for sustained economic growth over the medium term.Monetary Authority of Singapore (MAS) is the central bank of Singapore. and issues Singapore currency. securities. MAS has prudential oversight over the banking. and a sound and progressive financial centre. and sets out its monetary policy stance for the following six .

Such high rates were deemed to be uncompetitive. In the context of Singapore's open capital account. viz. unlike a retail sales tax system or an income tax system. public housing. like the GST. health care and national . On the recommendation of the 1986 Economic Committee. Singapore's government decided that it needed to shift from direct to indirect taxes. foreign exchange and money market operations. The government also argued that with an ageing population. which would be relatively easier to evade The main focus of the Government's expenditure is on the delivery of essential public goods and services to Singaporean. in order to maintain its international competitiveness in attracting investments. The tax also has a self-policing mechanism that discourages evasion. and the various factors and considerations underlying them. Singapore’s income tax base was expected to decline.months. the tax system inherently encourages savings and investments instead of consumption. The government argued that tax reform was necessary in order to maintain Singapore's competitiveness. With a broad-based GST. also has several features that make it attractive. MAS' money market operations are conducted mainly to ensure that sufficient liquidity is present in the banking system to meet banks' demand for reserve and settlement balances. in order to sustain long-term growth and job creation. As such. Singapore's exchange rate-based monetary policy system and its experience since its adoption are reviewed in MAS' monograph on Singapore's Exchange Rate Policy. A tax on consumption. and to sustain its economic growth in order to create well-paying jobs for Singaporeans The GST was part of a larger tax restructuring exercise to enable Singapore to shift its reliance from direct taxes to indirect taxes. Singapore's corporate income tax rate and top marginal personal income tax rate both stood at 40%. The Government spends to assure the nation of a secure future. the choice of the exchange rate as the focus of monetary policy would necessarily imply that domestic interest rates and money supply are endogenous. The key aspects of MAS' monetary policy operations. Therefore. the taxation burden would be more evenly spread among the population A value-added tax. not income. key areas of expenditure are on education. are discussed in MAS' monograph on Monetary Policy Operations in Singapore Fiscal Policy Before 1986.

investment and enterprise. i.security. which complemented the monetary policy in promoting sustained and non-inflationary economic growth.e. Singapore's tax policies. Singapore was able to enjoy consistent budget surpluses over the years. the Singapore Government has adopted the following principles in its conduct to meet its objective: the private sector is the engine of growth. without needing to balance this against the requirements of deficit financing.e. incentives for saving. As Singapore’s fiscal policy is directed primarily at promoting long-term economic growth. labour. which has served to boost investor confidence and provide a buffer against adverse economic shocks. seek to enhance its economic competitiveness and attract foreign investments to Singapore. Since product or income can be measured in several stages. This is evidenced by the fact that development expenditure accounted for around one-third of government expenditure on average over the last three decades. capital and enterprise. rather than cyclical adjustment or distributing income. This combination of fair tax policies and prudent expenditure programmes are key reasons for Singapore’s successful fiscal policy over the years. which extends throughout the public sector. in turn. Against the backdrop of such a prudent fiscal policy. The national income at this . there are several methods of measuring national income. With this ethos of fiscal rectitude. National income National Income is the net product of or net return on the economic activity of individuals. High domestic savings have further. the MAS has been able to focus on its primary goal of ensuring price stability and preserving confidence in the domestic currency through the appropriate management of the S$ exchange rate. although providing the main source of funding for the government. provided Singapore a high level of foreign reserves. which contributed to a high savings rate that allows it to achieve one of the highest investment rates in the world without having to incur foreign debt. At the beginning in the Production Cycle. due to high import leakages. and the government's role is to provide a stable and conducive environment for the private sector to thrive. tax and expenditure policies should be justified on microeconomic grounds and focus on supplyside issues. business firms and the social and political institutions that form a nation. The Government is also committed to building and maintaining world-class economic infrastructure and services. the counter-cyclical role of fiscal policy is limited. National Income can be taken as the cumulative value of the various factors of production i.

from 1960 until 2011.5 201. National Income is the cumulative value of income receipts of individuals (wages. GDP in Singapore is reported by the The World Bank Group.9 -7959.364.70 billion US dollars in 2011. savings of consumers and allocation of undistributed profits of manufacturing units. The gross domestic product (GDP) is equal to the total expenditures for all final goods and services produced within the country in a stipulated period of time.142.610. Singapore GDP averaged 51.7 USD Billion in December of 2011 and a record low of 0.9 -9400.4 213. semi fabricates.4 162. durable capital and services of other industries used in the production process.7 -17363.872.9 158. dividends) and undistributed net profits of manufacturing units. At the level of Distribution of Money.9 -7030.8 USD Billion reaching an all time high of 239.382.3 221.9 Market Prices Gross Domestic 137.246.8 251. .387.2 250. The GDP value of Singapore represents 0.5 -10927.436. it is the cumulative value of the flow of goods to consumers.1 185.6 SINGAPORE GDP The Gross Domestic Product (GDP) in Singapore was worth 239.39 percent of the world economy. The gross domestic product (GDP) measures of national income and output for a given country's economy.1 257.6 174.stage is the value of the total product of each industry after deducting the value of materials. salaries.453.246. Historically.7 USD Billion in December of 1960.912. Gross 1998 2003 2004 2005 2006 2007 2008 National Income(GNI) GNI at 141.6 191.902. Lastly at the level of National Product. This page includes a chart with historical data for Singapore GDP.2 234.5 Product At Market Prices Net Income From Abroad 3970.313.5 -3928.418. The National Income of Singapore is illustrated for a period from 1998 to 2008 in the following table.

They are the income approach. Generally. This means that $50 is not reported. output approach and expenditure approach. The excess $50 shown in the expenditure accounts. and not in the income accounts is equal to the size of the hidden economy. statistical discrepancy can be used to measure the magnitude of a country’s hidden economy.Measuring the National Income There are three methods in measuring national income. The size of the hidden economy can be measured via the statistical discrepancy derived from national income and national expenditure. Singapore reports her national output using all three methods. Income earned by the individuals is not known.0007 percent in 1996. The size of the discrepancy can provide us with information on the relatively efficiency of the methods of collecting data.9 percent of the GNP ($729. the computed national income figures for a country for a specified period should be equal. Whichever method used. Also. Unreported and/or underreported income earned will show up as expenditure. The statistical discrepancy in Singapore has since reduced in size. His/her spending should amount to $150. For instance. the ratio has fallen to 0. different national income figures are usually derived using different approaches. Various definitions of hidden economy exist in the literature. in most cases. The idea is intuitively simple of understand. the hidden economy is that part of the GDP which is under-reported and/or unreported in official statistics. For instance in 1986. usually in the form of cash. However. However. They are obtained using the income and expenditure approaches respectively.009 percent in 1994. More . 0. What about those countries which do not generate national income statistics based on the income approach? Can they measure the hidden economy using statistical discrepancy derived from national output and national expenditure statistics? The answer is yes although unreported income is not shown in the discrepancy figures. a person may have earned $150 but reported only $100 in his income (which will be included in the national income accounting under the income approach). the discrepancies derived from national output and national expenditure can be used to measure the hidden economy.5 million) while in the last three years.0006 percent in 1995 and 0. The difference is known in the literature as statistical discrepancy. it accounted for 1.

Japan (4. There are however some import restrictions based mainly on environmental. the national income figures measured using the three approaches should yield the same results that is national income calculated using the following expression: Output Approach (T) = Income Approach (I) = Expenditure Approach (E) Since E – I = H. Singapore has the highest trade to GDP ratio in the world at 407. Import & Trade International trade is highly important for Singapore. Singapore’s imports were valued at US$310.7 percent of . Trade partners with Most Favoured Nation (MFN) have zero tariff rates applied to their products apart from six lines for alcoholic beverages.5 percent). 47 percent of Singapore’s exports consist of re-exports. food. Singapore also regularly engages in entrepôt trade. whereby industries and businesses in the country import raw materials.9 percent. A large percentage of trade is conducted to meet domestic demand for energy. US (11. Singapore is the 14th largest exporter and the 15th largest importer in the world. The US was Singapore’s primary source of imports (14. and other necessities. As a strong advocate of free trade. China (9. Indonesia (9.4 billion. as it has virtually no natural resources. they measure unreported and /or underreported goods and services produced in the country via the productive sectors.6 percent of total exports). and T = I. which crosses the production boundary but are not reported to the tax authority. and public security concerns. According to the WTO. Malaysia (11. where H is the size of the hidden economy. health. will show up as expenditure in the expenditure accounts. Singapore’s exports were valued at US$351.7 percent). before refining them for re-export.2 billion. then E=T+H H=E-T Goods and services that are produced in productive sectors.6 percent). The primary export partners include Hong Kong (11. Recall that by definition. Singapore’s Export. The import of rice also requires import licensing in order to ensure food security and price stability.2 percent).7 percent).specifically. Singapore has relatively few trade barriers. In 2010.

8 percent) and Industry (27.6 percent). In 2010. In 2010. Finally the Asian Dollar Market in Singapore has become an influential element to the economic development of the whole of Asia with assets of more than US$582 billion recording in 2004. production. With the advent of the two new integrated resorts in 2010. Incentives. tourism is the other major service industry available in Singapore. Services (72.6 percent). Singapore is the 18th largest exporter of oil in the world. Singapore is also a global leader in services. Singapore has the third largest oil refinery in the world. the gaming industry and the MICE (Meetings. integrated securities and derivatives exchange in Asia-Pacific. The Singapore Petroleum Company (SPC) is also a leading player in the petroleum industry and is engaged in exploration. besides Japan. despite not having a single drop of proven oil reserves in the country.638 million visitors with tourist receipts of more than S$18. Although Singapore has specialized in digital and electronics manufacturing for the past forty years. Thanks to government initiatives. refining and distribution. tourism expenditure in sightseeing and entertainment grew by an astonishing 1. Singapore imports oil from other countries before refining them for further use to other countries. Indonesia (5. biomedical and pharmaceutical manufacturing are seen to be the future for Singapore industries. behind Rotterdam and Houston. Thanks to government initiatives and subsidies. tourism has diversified into niche markets such as medical tourism. Manufacturing is another major industry in Singapore. Singapore is recognised as one of the premier asset management centres in Asia with more than 200 international asset management firms.5 percent).8 billion. to be part of the Citigroup World Bond Index.2) made up the bulk of Singapore’s GDP in 2010. Conferencing and Exhibitions) industry. particularly in finance. Remarkably. Singapore exported 1.834 percent in 2010. New York and Tokyo.total imports) followed by Malaysia (11.7 percent). Singapore has the fourth largest foreign exchange market in the world after London. Agriculture’s contribution was virtually irrelevant – statistically it accounted for zero percent of . Singapore’s banking system is considered to be among the strongest in the world. Apart from finance. The Singapore Government Securities is the only Asian market. The Singapore Exchange (SGX) was also the first demutualised. South Korea (5. Singapore’s Industry Sectors The petroleum and petrochemicals industry in Singapore is one of the biggest in the world.8 percent). tourist arrivals to Singapore hit a record high of 11. the country has diversified into other forms of manufacturing.374 million barrels of oil/day. Japan (7. China (10.

it is all the more important for MAS to preserve the real value of our official foreign reserves. The city state has remained vulnerable to fluctuations in overseas demand for manufactured goods even as the government boosts the financial services and tourism industries to cut reliance on exports. Price stability The Monetary Authority of Singapore.” Singapore’s central bank. faces the challenge of maintaining price stability amid a more volatile global environment. and the worries over global deleveraging and rebalancing. Safeguarding Reserves Singapore’s reserves have climbed to more than $200 billion now from $1. Lee said today. which uses the island’s dollar to manage prices.4 billion in 1971. “Energy and commodities prices continue to fluctuate around elevated levels. and asset price inflation will remain a risk .S. Prime Minister Lee HsienLoong said. to maintain confidence and deter speculation in the Singapore dollar” .”Lee said in a speech in Singapore today. MAS must address these issues to keep prices stable and maintain preconditions for economic growth. “Safeguarding the real value of our official foreign reserves in a more challenging and risky investment climate” is an issue the central bank must contend with. financial markets and capital flows will continue to be volatile. “In an environment of lower returns and higher risk. Lee said. said last month it will slow gains in its currency. the city state’s central bank. After two years of negative industrial production growth due to the global financial crisis. Singapore’s industrial production growth rate for 2010 was the third highest in the world at 25 percent – behind Qatar and Taiwan. “Because of the economic and political uncertainties in the EU and U. joining other Asian policy makers in trying to juggle inflation pressures with protecting growth amid a faltering global recovery.the GDP..

From 2011 to 2016.3 percent in order to contain imported inflation. width and center of the band. Singapore also has the third highest GDP (PPP) per capita in the world.14 percent in 2009. With the Singaporean government recently revaluing its currency upwards by 1. Singapore’s GDP (PPP) growth will fall between 5.699 billion and its GDP (PPP) was US$291. US dollars) and GDP (PPP).178.6428 . Inflation is forecast by the monetary authority to average about 5 percent this year and 2.75 to 6.42 percent. From 2012 to 2016.56 percent from 2009 to 2010.The central bank had tightened monetary conditions at each of its previous three semi-annual reviews before the October decision.5 percent to 3. Singapore’s GDP (PPP) per capita is expected to rise by 3. In 2010.60 percent in 2011. higher costs in transport. In 2010. housing and food have caused inflation rates to rise significantly between 2007 and 2010. Singaporeans are expected to be wealthier with its GDP (PPP) per capita increasing by 4. By the end of 2016. It adjusts the pace of appreciation or depreciation by changing the slope. US dollars) was US$222. Singapore’s GDP (current prices. Singapore’s average inflation rate (average consumer price change) was 0.” Ong Chong Tee.5 percent in 2012 Singapore's Economic Outlook for 2015 Singapore’s Economic Forecast Singapore is the 40th largest economy in the world according to both GDP (current prices. The monetary policy stance remains “appropriate.73 – behind Qatar and Luxembourg. Singapore’s GDP (PPP) per capita was US$56. a deputy managing director at the central bank. the average GDP (PPP) growth rate from 2003 to 2007 was 11.937 billion.14 percent annually and reach US$72.82 by the end of 2016.268 percent. Prior to the financial crisis.70 percent in 2008 and 0. The Monetary Authority of Singapore guides the local dollar against a basket of currencies within an undisclosed band.46 billion. Singapore’s GDP (PPP) is expected to reach US$413. told reporters last week.521. Singapore’s GDP (PPP) grew by 15. From 2002 to 2006. This reflected the strong overall economic recovery from the 2008 global financial crisis where GDP (PPP) had only increased by 3.94 to 4. Although Singaporeans do generally enjoy fairly low inflation rates.

However. inflation (average consumer price change) in Singapore is expected to be hit 3. .612 percent in 2008. . The next five years should see inflation rates gradually decrease and reach 1. peaking at 6. 2007 to 2010 saw an average inflation rate (average consumer price change) of 3.976 percent by 2016.03 percent.percent.3 percent. In 2011.