Singapore’s Economic Status Overview
The research study has been conducted to analyse the current economic status of Singapore. Precisely, the country has been renowned as a high-income economy in the world. According to the released data, Singapore is the fourth richest country in the world with a per capita GDP worth US$ 52600.6 as of 2016 (Singstat.gov.sg, 2017). In the meanwhile, the current growth figures of the economy have been stronger than the estimation as the annual GDP growth rate is recorded at 2.5 percent in the latest quarter of 2017.
Decisively, the acceleration in the exports sector has boosted the overall Gross Domestic Product of the economy. In terms of long-term economic benefits, Singapore has offered the most business-friendly environment for the international as well as domestic companies and regulatory framework of the nation has been simplified (Rajan & Rongala, 2015). However, Singapore has been termed as one of the most competitive economic nations in the world. In spite of the growth scenario, the internal restructuring policies of the Singapore government have produced latest issues for the economy to be dealt with in the recent past.
Singapore economy can be termed as one of the leading global economies having substantial GDP and GDP per capita numbers. In the longer-run, the economic performance trend has managed an upward swing. Precisely, the growth in the exports has fuelled the GDP growth of the nation in the recent time. The analysis of the GDP chart since 2007 can be shown to verify the continuous GDP growth model of the economy. Since 2007 to 2014, the economy of Singapore has registered the GDP figures that were trending upside. From US$ 179.98 billion in 2007, the Gross Domestic Product of the economy was recorded worth US$ 308.14 (Singstat.gov.sg, 2017). In the meantime, global market worries, US policy reforms, and negative outlook of the eurozone countries have contributed towards downfall in GDP in 2016 recorded worth US$296.97 billion.
Figure: Singapore Gross Domestic Product (2007-2016)
Source: (Singstat.gov.sg, 2017)
As shown in the graph listed above, the GDP of Singapore has improved by more than one and a half times showing the potentials within the economy (Singstat.gov.sg, 2017). In terms of GDP annual growth rate, the latest reports published by Statistics Singapore, the economy of Singapore has stretched at a growth rate of 2.5 percent in the last June quarter in 2017. As depicted in the graph figure below, the GDP annual growth rate of the economy has been revolving around 1 percent to 5 percent whereas in the last quarter of 2013, the growth rate has crossed 5 percent mark (Sgs.gov.sg, 2017). Evidently, the adverse global cues may hinder the short-term growth of the economy although the long-term prospects have remained intact.
GDP Analysis of Singapore
Figure: Singapore GDP Annual Growth Rate (2007-2016)
Source: (Singstat.gov.sg, 2017)
However, it must be stated that during the GFC in 2008-2009, the economy had registered its worst contraction. Since that point of time effective monetary and fiscal policy have set the upward GDP growth trend for the economy (Saint-Jacques, Shimizu & Hirakawa, 2014). Understandably, the economy of Singapore has been largely driven by the increased demand opportunities and improvement in the exports sector. As a result of the scenario, the GDP per capita status has been improved at an outstanding order over the last decade or so as charted in the figure below.
Figure: Singapore GDP Per Capita (2007-2016)
Source: (Singstat.gov.sg, 2017)
Evidently, after GFC scenario has got over, the turnaround of the economy has been noticed. Since that point of time, the GDP per capita has increased from US$ 41133.3 in 2009 to US$ 52600.6 in 2016 (Singstat.gov.sg, 2017). Counting on the GDP per capita, Singapore has been listed among the top five richest countries around the world economy verifying the performance and strong economic output.
The outward-oriented growth tactics of the Singapore government has resulted in the economic prosperity since the time of independence. According to the released data, Singapore has shared 0.48 percent of the global GDP. In the past, the economy has been known for its labour-intensive exports. But since the development in the manufacturing and services sector, the Singapore economy has been transformed into value-added exporting nations. In the meanwhile, the contribution of the government policies such as tighten fiscal policy must be admitted. The target-oriented fiscal policy of the economy has helped to maintain budget surplus, foreign currency reserves, and higher credit ratings. In-depth analysis of the economy has reviewed that driven by the tight fiscal policy, the Singapore economy has been expanded at a compounding rate of twelve percent on yearly basis. Also, the government of the nation has invested significant amount of capital reserves into infrastructural development so that FDI has been kept coming ensuring long-term liquidity in the market.
The analysis of the labour market in Singapore can review the current as well as previous unemployment trend. Although the unemployment rate in Singapore is well below 2.5 percent since 2010, recently the Prime Minister of Singapore, Lee Hsien Loong has expressed cautionary statement for the job market. In terms of reasons, the unreliable global economies activities have been represented. Meanwhile, Singapore’s job market can be hit hard by the uncertainties building up regarding eurozone and other developed economies such as US and UK. Currently, structural alteration within the economy has been a considerable challenge for Singapore economy affecting the job market (Lee, 2017). Apart from that, ageing population and technological advancement contributed towards the rise in the rate of unemployment although the GDP annual growth has shown improvement (Kit, 2017).
Unemployment Analysis of Singapore
Figure: Singapore Unemployment Rate (2007-2017)
Source: (Stats.mom.gov.sg, 2017)
In the above presented graph chart, the unemployment statistics of the economy over the past ten years has been illustrated. Clearly, the impact of Global Financial Crisis (GFC) in 2008-09 has been shown in the chart. The unemployment rate has increased recently after the GFC due to the occurrence of cyclical unemployment. The primary reason for the occurrence of cyclical unemployment is the downfall in the market that leads to the fall in the demand for workers in the labour market (Flórez, 2017). As Singapore is a destination and registered headquarter for several multinational companies, the impact of GFC can be highly evident in the Singaporean economy. Hence, GFC was the primary factor leading to increase in the unemployment rate right after the start of financial crisis in the Singapore market.
According to the recently published jobless data, the unemployment rate has recorded at 2.2 percent in the latest quarter. Evidently, the unemployment trend in the economy has been outstandingly low since 2010 (Moffitt, 2014). However, another type of unemployment that occurs in the Singapore economy is structural unemployment. It occurs due to the lower level knowledge and skills among the young generation people. It can be seen that most of the well reputed firms search for well experienced workers and does not provide jobs to fresher (Steers & Nardon, 2014). Hence, the lack of skills and knowledge among the fresher is the primary factor for structural unemployment. The statistical report of the Singapore government shows that the unemployment rate among the youth with age ranging from eighteen years to twenty five years is around 7.6 percent.
On the other hand, the labour market of the economy has been largely boosted by the healthcare, manufacturing, and services industry where the maximum numbers of jobs have been created (Das, Edirisuriya & Swarup, 2012). The rapid industrialisation in the economy has developed wide range of business activities in the country supporting the job market since GFC. However, a minimum level of unemployment will always remain in an economy due to the occurrence of frictional unemployment or temporary unemployment. Frictional unemployment occurs due to the voluntary leave of job of a person in search of new and better job (Ilmakunnas & Pesola, 2013). The time period between the retirement of an individual from one job and the employment to another job leads to frictional unemployment in the economy. It is important to note that frictional unemployment cannot be dealt because it is a part of human behaviour.
Inflation Analysis of Singapore
Moreover, the Singaporean Government has used its economic policies to control the labour market effectively. For example, the government cancels the VISA of the expats after losing their jobs in order to maintain stability in the labour market (Brassard & Acharya, 2016). Additionally, the government provides wavers and tax benefits to multinational firms to attract FDI (Flórez, 2017). Hence, the policies of the Government of Singapore have helped to maintain a better economic balance in the labour market.
The inflation rate of an economy helps to observe the constant increase in the average price level for a period. Being one of the top 10 richest countries of the world, Singapore has faced a high level of inflation during the GFC for around 7.6 percent. By the end of the GFC, the economy started facing high level of downfall in the aggregate price level resulting in a deflation during 2009-10 (Stats.mom.gov.sg, 2017). Later on, the high level of rise in the aggregate demand in the Singaporean market led to the rise in the aggregate price level resulting in an inflation rate of around 5.8 during 2012. However, the country again faced deflation during 2015 and continued till the end of 2016. The current inflation rate of Singapore is around 0.5 percent (Stats.mom.gov.sg, 2017). A figure has been given below presenting the last ten years price level changes of Singapore:
Figure: Singapore Inflation Rate (2007-2016)
Source: (Stats.mom.gov.sg, 2017)
There are two major reasons for the occurrence of price level increase and decrease in a country that are named as cost push inflation and demand pull inflation. It can be seen through the last ten years economic analysis report that the downfall in the Singapore economic balance resulted in a fall in the short run aggregate supply during the GFC in 2008. Hence, the decrease in the aggregate supply impacted the price level of products and services in Singapore. The cost push inflation graph has been given below for further consideration:
Figure: Cost Push Inflation Curve
Source: (Berlatsky, 2013)
According to the above diagram, it can be seen that the fall in the aggregate supply has resulted in a leftward shift in SRAS curve from SRAS1 to SRAS2. However, the aggregate demand remains constant at AD. Therefore, the price level in the Singapore market increases from P1 to P2 during the GFC (Berlatsky, 2013). However, a high level of aggregate demand has again led to inflation during the years 2011 to 2013. A demand pull inflation curve has been given below for further consideration:
Figure: Demand Pull Inflation Curve
Source: (Berlatsky, 2013)
The above diagram shows that an increase in the aggregate demand resulted in a rightward shift in the Aggregate Demand (AD) curve from AD1 to AD2. Alternatively, a slight rise in the short run aggregate supply can be seen, which comes to the previous value in the long run. Due to this a high range of rise in the price level can be evident in the market (Berlatsky, 2013). However, the aggregate demand decreases during the 2015 and 2016 due to the rise in the interest rate that results in an deflation during that period.
It can be seen through the last ten year analysis that the Singaporean government has used its monetary policies and fiscal policies to control the price level increase in the market. At present, the inflation rate in the Singapore economy is around 0.5 percent. The government has used the low interest rate policy and price flooring policy to control inflation rate in the economy (Kobayashi, 2014). Additionally, the Singapore government effectively made changes in the taxation policy to keep the aggregate price level in control.
Conclusion
By considering the above analysis, the Singapore Government has effectively used it monetary and fiscal policies in order to make the country one of the top ten richest nations of the world. Current, the annual GDP growth rate of the nation is around 2.5 percent that presents the constant development of Singapore. Furthermore, the business promotional tactics used by the government has helped the economy to meet the growing job requirements of the demographics. Additionally, the Singaporean government introduce a policy to cancel the VISA of the foreigners after losing their jobs in order to minimise the migration rate and control the unemployment level in the labour market. On the other hand, the Government of Singapore has used its interest rate policy and price flooring policy to control the aggregate price level in the market.
References
Berlatsky, N. (2013). Inflation (3rd ed.). Detroit, MI: Greenhaven Press.
Brassard, C., & Acharya, S. (2016). Labour market regulation and deregulation in Asia (4th ed.). New Delhi: Academic Foundation in association with Lee Kuan Yew School of Public Policy, National University of Singapore.
Das, R., Edirisuriya, P., & Swarup, A. (2012). Regional Trade and Economic Integration (3rd ed.). Singapore: World Scientific.
Fiscal Policy. (2017). Sgs.gov.sg. Retrieved August 2017, from https://www.sgs.gov.sg/The-SGS-Market/Fiscal-Policy.aspx
Flórez, L. (2017). Informal sector under saving: A positive analysis of labour market policies. Labour Economics, 44, 13-26.
Ilmakunnas, P., & Pesola, H. (2013). Regional Labour Market Matching Functions and Efficiency Analysis. Labour, 17(3), 413-437.
Kit, T. (2017). Singapore’s unemployment rate: How much higher could it rise?. Channel NewsAsia. Retrieved August 2017, from https://www.channelnewsasia.com/news/business/singapore-s-unemployment-rate-how-much-higher-could-it-rise-8818602
Kobayashi, T. (2014). Hybrid Inflation-Price-Level Targeting in an Economy With Output Persistence. Scottish Journal Of Political Economy, 51(5), 641-653.
Lee, Y. (2017). Economists upgrade Singapore’s 2017 growth forecast. CNBC. Retrieved August 2017, from https://www.cnbc.com/2017/03/15/economists-upgrade-singapores-2017-growth-forecast.html
Moffitt, R. (2014). Unemployment benefits and unemployment. IZA World Of Labor.
Rajan, R., & Rongala, S. (2015). Asia in the global economy (3rd ed.). Hackensack, NJ: World Scientific Pub.
Saint-Jacques, B., Shimizu, H., & Hirakawa, H. (2014). Japan and Singapore in the World Economy. Japan’s Economic Advance into Singapore 1870-1965. Pacific Affairs, 73(2), 274.
Statistics Singapore – Statistics. (2017). Singstat.gov.sg. Retrieved August 2017, from https://www.singstat.gov.sg/statistics
Steers, R., & Nardon, L. (2014). Managing in the Global Economy (3rd ed.). Hoboken: Taylor and Francis.
The Singapore Economy. (2017). Sgs.gov.sg. Retrieved August 2017, from https://www.sgs.gov.sg/The-SGS-Market/The-Singapore-Economy.aspx
Unemployment Rate. (2017). Stats.mom.gov.sg. Retrieved August 2017, from https://stats.mom.gov.sg/Pages/Unemployment-Summary-Table.aspx
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