The Singapore economy is considered as the free market economy. The economy of Singapore is regarded as the most open economy in the world. The Singapore economy has GDP of 14.2% and has reported third highest per capital GDP globally based on the purchasing power parity. In Singapore economy companies that are linked by government play a noteworthy role in attracting foreign direct investment. Singapore has attained the advantage from the inward flow of FDI across the world-wide venture capitalist and institutions because of exceedingly striking climate for investment and steady governmental atmosphere.
The position of Singapore is regarded as the regional hub for wealth management particularly comprising of exports in wide range of electronics, chemicals and services which eventually contributes as the source of revenue for the economy (Bernanke et al., 2015). The government of Singapore relies on the extended notion of intermediary trade by purchasing the raw materials and refining those materials for the purpose of re-export. Furthermore, the administration endorses greater level of investments and venture through the programmes namely the central provident fund that is employed to account the needs of retirement.
The economy of Singapore is firmly on the path of expansion during the first quarter of 2018 which is supported by growth in the manufacturing sector. The GDP growth is anticipated to come within 2.5% to 3.5% during 2018 reflecting the weakened international demand for electronic and engineering products. Additionally, the recent economic events suggest that consumer segment in domestic cluster has also weakened during the start of 2018 following the high in 2017.
The present essay makes an attempt to assess Singapore economic performance ranging from the 2008-18. Singapore’s performance trend is assessed by using the major macroeconomic parameters such as Real GDP, GDP Per Capita, Unemployment and Inflation.
Real GDP refers to the inflation adjusted measures that helps in reflecting the worth of the all goods and services that is manufactured by the economy in a particular year conveyed as the base year price and is generally referred as the continuous value or constant dollar GDP (Laibson & List, 2015).
Figure 1: Figure representing Real GDP of Singapore
Source: (ceicdata.com, 2018)
Taking into the account the above stated figure it is understood that the real GDP of Singapore and grew by 7.4% average from 1976 to 2018. The real GDP have attained the all-time high of 19.0% in June 2010 while attaining the all-time high of -8.8% during march 2009.
The real GDP growth rate can be defined as the rate at which the country’s gross domestic product changes or rises from time to time. GDP can be defined as the market worth of products and services created in the state during the specific time period (Goodwin et al., 2015).
Figure 2: Figure representing Real GDP of Singapore
Source: (tradingeconomics, 2018)
As evident from the above stated figure the Singapore economy has advanced 3.8 per cent in the second quarter of 2018. As per the figure Singapore has lost steam from the downwardly revised 4.3% attained during the first quarter and lower than the consensus anticipation of 4% growth. Based on annual quarter to quarter growth the economy of Singapore grew by 1% following the downwardly reviewed 1.5% growth. The annual GDP rate of growth in Singapore averaged around 6.65% till 2018 and reached highest of 19% during the second quarter of 2010 and recorded the low of -8.80% during the first quarter of 2009.
The real GDP per capita is regarded as the amount of the total economic productivity of a state alienated by the entire amount of persons and attuned for inflation (Sunley, 2017). The Real GDP per capita is employed to compare the living standard between the nations over the time.
Figure 3: Figure illustrating Singapore GDP Per Capita
Source: (tradingeconomics, 2018)
The real GDP per capita in Singapore that was documented stood in 55235.51 during 2017. Singapore GDP per capita is equal to 437% of the world’s average. Until 2017 the average GDP per capita of Singapore stood 23545.84 and reached the highest of 55.235.51 USD in 2017 and also reported the lowest of 3389.60 USD during 1960.
The economic development and strategy of growth at the national level in Singapore is formulated by the Ministry of Trade and Industry (Robert, 2018). The government of Singapore has set up Standard productivity and innovation board as the measure of growing Singapore small and medium enterprise through productivity improvement, capability improvement and management growth in technology and innovation.
The government of Singapore as the measure to improve productivity output has set up Economic Strategies Committee (ESC) to generate new economic strategies for reinvesting in Singapore (Mankiw, 2017). ESC recommends the government to emphasis on the productivity driven growth for qualitative reformation of the economy towards the attainment of higher value activities and becoming the leader in innovation and skilled labour.
As announced by the Singapore government during the budget 2017, the government has introduced the Product and Innovation Credit (PIC) bonus as the measure of encouring the productivity and innovation. Additionally, Trade Association and Chambers (TAC) has been set up by government to encourage industry collaboration for improving the productivity in a time of four years by identifying the sector-wide issues related to productivity. A ten-year economic restructuring plan has been undertaken by ESC to attain growth in labour productivity.
Unemployment trends based on unemployment rates:
The seasonally adjusted unemployment trend of Singapore fell down to 2% during the quarter month of march 2018 from the previously reported quarterly figures of 2.1%. The figures are in line with the preliminary estimations with lowest unemployment rate since the first quarter of 2016. This is because the lay of felled in the five years whereas the job opportunities have outnumbered the employment searchers for the first time in last two years. The rate of unemployment in Singapore has average around 2.44% till 2018 and reached the maximum of 6% in first quarter of 1986 and recorded as low as 1.40% during the second quarter of 1990.
Figure 4: Figure illustrating Unemployment Rate in Singapore
Source: (tradingeconomics, 2018)
As evident from the above stated figure the overall employment gained by 3700 after the seasonal high of 10,700 in the earlier quarter. Exclusive of overseas domestic workers the employment increased by 400. The growth in employment was assisted by the rise in service led by the public, communal individual services, insurance services and information & communication. Joined with lesser unwaged people over the quarter, the twelve-monthly attuned ratio relating to job openings over the unwaged person bettered to 104 per job seekers of 100 from the previous reported figure of 92 in the earlier quarter of December.
Unemployment implies the state of affairs where people that are keen and have the capability to work are incapable of discovering work at the prevalent rage of wages (Maurice & Thomas, 2015). There are certain categories of unemployment namely the cyclical unemployment, structural and frictional unemployment.
Cyclical Unemployment: An economy experiences several highs and lows. This is known as cyclical unemployment since it occurs in cycles. When there is a recession in the economy several lost jobs are lost (Weber, 2017). For instance, during the great depression the rate of unemployment increased as high as 25% which signifies that one out of four are willing to work but are not able to find work. Therefore, majority of unemployment was regarded as the cyclical unemployment.
Frictional Unemployment: Frictional unemployment happens because of usual turnover in the employment market and that time that is taken for workforces to find the new job. In the labour market the labour changes job and when such change happens it takes up the time to match up with the potential employees with the new employees (Mankiw, 2014). This is refereed as the frictional unemployment.
Structural Unemployment: Structural unemployment happens because of absenteeism of demand for certain form of workers. This form of unemployment usually occurs when there is a disparity amid the skill wanted by the companies and abilities possessed by the workers (Dewett, 2015). Major technological advancement in the technology along with reduction of costs in overseas labour results in this form of unemployment.
In Singapore there are three common form of unemployment namely the cyclical, structural and frictional unemployment.
Cyclical Unemployment: Demand deficient or the cyclical unemployment forms the root cause of unemployment in Singapore due to its large external sector and largely reliant on the external demand for the economic rise (Feige, 2016). For instance, if the global demand for Singapore electronic export declines then the companies producing electronic goods would face fall in demand. Therefore, companies that faces lower demand may reduce the production cost by lowering the output and employment.
Structural Unemployment: With globalization there are large number of reformation in Singapore and this may impact the structural joblessness in Singapore. Singapore has transformed from the “labour intensive” economy to “capital intensive” economy leading to diverse abilities. Singapore has presently shifted to biomedical and R&D industries and workforces can only work in the subordinate engineering productions that may find themselves unemployment because bulk manufacturing may be contracted out to India and China.
Frictional Unemployment: Frictional unemployment happensin Singapore for the time taken by the citizens in locating the new job when they change job (Mankiw, 2014). In Singapore, freshly graduates or students that are studying tends to be frictionally unemployed for the time taken by them to locate or find new job.
To assist workers in switching jobs across the sectors the government has created a career conversion program that will expand to sectors such as pharmaceuticals, logistics and retail. Additionally, the government has introduced P-Max programme that would promote partnerships with trade associations (Feige, 2016). As a result of this more workers would be able to find jobs in small and Medium Sized enterprises each year. Singapore government has also implemented Career Support Programme where employers can have the subsidised salaries for 20% for the period of six months and 10% for the later part of six months.
Inflation trend based on Inflation Rate:
The consumer price inflation of Singapore increased to 0.6% on yearly average during the month of June 2018 from the previous reported figures of 0.4% in the preceding month, corresponding the consensus. It was regarded as the highest rate since the month of November primarily because of higher cost of food and transport while housing deflation relieved (Maurice & Thomas, 2015). The inflation rate in Singapore aggregated around 2.60% till 2018 and reached the highest of 34% during the month of March 1974 and stood as low as -3.10% during the month of September 1976.
Figure 5: Figure showing inflation rate for Singapore
Source: (tradingeconomics, 2018)
Inflation is regarded as the environment of sustained upward rise in the general prices and not the prices of one or two goods. As stated by Laibson & List, (2015) inflation is persistent and appreciable increase in the general price or the average price.
Demand Pull Inflation: An increase in the aggregate demand over the accessible output results in increase in the prices. This is known as demand pull inflation. The demand pull inflation represents an increase in the aggregate demand in supply of money. Given the supply of money in the economy surpasses the available goods and service it results in Demand Pull Inflation.
Figure 6: Figure showing Demand Pull Inflation
(Source: Goodwin et al., 2015)
Cost Push Inflation: In an economy an inflation may originate due to the overall increase in the cost of production. Such forms of inflation are known as cost push inflation (Goodwin et al., 2015). The cost of production might originate because of the rise in the price of the raw materials, wages and etc. Hence, an increase in wages results in higher cost of production leading to increased commodity prices.
Figure 7: Figure illustrating Cost Push Inflation
Source: (Goodwin et al., 2015)
The rate of inflation increased to as high as 5.5% during January 2011. Singapore has higher import on commodities and significantly contributes to supply shock. The CPI increased as high as 5.5% showing an increase in higher food, housing and cost of transportation. Gains in food increased by 1.9% and manufactured goods by 1.1%. The indices originated from costly wheat and unwrought tin. Singapore being the small and open economy with less amount of natural resources, it is largely dependent on the imports from other nations such as Malaysia and China (Robert, 2018). This results the export and import expense being three times more than the GDP of Singapore.
Another reason that contributes to inflation is increase in wages of workers. Evidences suggest that wages have increased by 5.4% and sustained enhancement in the labour market together with the somewhat rapid growth in wage have raised the inflation. The core consumer price inflation increased to 0.6% during June 2018 from 0.4% during the earlier month. This is mainly because of the higher price in food and transport.
During the budget of 2013 the Monetary Authority of Singapore has allowed an appreciation of Singapore Dollar as the measure to mitigate the higher price of import of food and oil. The MAS introduced the exchange rate policy as the measure to offset lower food price inflation. The government also introduced the disinflationary policy in January 2018 to disburse the additional rebates for services and conservancy charges to dampened the headlining inflation.
MAS has also decided to increase the slope of S$NEER policy band in 2018 (Maurice & Thomas, 2015). The policy stance is in compliance with the modest and gradual appreciation of S$NEER as it will help in making sure that medium term price remains stable. While the supply side measures include adopting worker’s skill development program as the measure to assist the middle and lower income group.
Conclusion:
Conclusively, growth rate in GDP is anticipated to rise to 2.4% during the second quarter of 2018 while in the long run it is anticipated to converge with the national average. The economy of Singapore would continue to feature the manpower lean situation. However, the only way to cope up with the tighter labour market conditions and sustaining higher wages is through growth in productivity. The government of Singapore is conducting further study to enhance the overall quality of construction of workforce.
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