Singapore Economy

International Group Project: Singapore

Singapore boasts that one out of six residents has over a million dollars US.  Its central location between Asia and Europe and extensive ports make it a world renowned shipping force.  We believe there are many opportunities for investment in this booming country, and the economic climate is quite hospitable to international corporations looking to do business in Singapore.

Singapore’s Economic Overview

GDP

Real GDP growth averaged 6.9% between 2004 and 2008. The economy contracted 1.3% in 2009 as a result of the global financial crisis, but rebounded nearly 15% in 2010.  Singapore’s economy advanced by 2.9% year-on-year in 2014 (380,585M Singapore $), slightly slowed down from previous year (4.4%). However, broadly speaking (except 2009) the growth rate of Singapore’ GDP is quite high, especially compared with the other developed countries. The graph shown in appendix C explains how Singapore’ economy continuously recorded strong growth over the past 50 years. The growth rate of 15.2% in 2010 was an all-time recorded high in the country’s history and was driven by exports, tourism and a booming manufacturing sector.

As shown in the table in Appendix C, the service industry of Singapore has increased in relative size from 56.1% (1970) to 66.8% (2014). The major subcategories of the service industry are tourism, MICE (Meeting, Incentives, Convention, Exhibition), and the Shipping industry.  The increasing percentage of GDP that are services is another indicator that Singapore is becoming a major industrialized economy.

According to World Bank, the compound annual growth rate of Singapore’s GDP (5.4%) over the past 15 years (2000-2014) is much higher than the average of Organisation for Economic Co-operation and Development or OECD (1.6%). This indicates a significant strength of Singapore economy comparing to other developed countries (“Statistics Singapore” 2016).

Monetary Policy

Singapore’s monetary policy since the late 19th century has been based on managing the exchange rate with the goal of maintaining price stability and promoting sustainable economic growth.  The exchange rate is managed against a ”basket” of currencies, which are weighted differently based on the importance of the country to Singapore’s trade with the rest of the world.  It is allowed to fluctuate within a certain range, the amount and direction of which is modified and announced twice per year.  The announcement coincides with the “Macroeconomic Review,” a report that outlines trends in the overall economy and provides other information to help the public understand the stance of the Monetary Authority of Singapore (Singapore’s central bank).  Because the MAS manages the exchange rate, it has no direct control over interest rates and the money supply.  This means that domestic interest rates are determined by foreign interest rates and investor expectations about the movement of the Singapore dollar in the future.  Historically, rates have usually been below US interest rates.