Discuss about the Economy Of Singapore.
The Singaporean economy displays an exceedingly developed trade-oriented market economy. The economy is ranked the greatest open one globally, 7 least corrupt country, record pro-business country, with low rates of taxation of 14% of the Gross Domestic Product. Singapore is third highest per capita GDP based on PPP (Purchasing Power Parity). The economy is protuberant FDI outflow financier internationally. The economy has profited from inward Foreign Direct Investment flow from global investors besides institutions due to the economy’s appealing investment environment and a stable atmosphere politically.
The economy of Singapore is well referred as the regional hub for the management of wealth as a result of its electronics, services as well as chemicals exports that avail leading revenue source. Via such a large revenue, Singaporean economy can buy raw-goods besides natural resources which it lacks (Economics, 2013). The outlook of this economy seems to have turned in to being less depressed subsequent to the commencement of year 2017, with first quarter growth surpassing the estimated figures whereas the administration expecting a greater GDP estimates in 2017.
The economy remains on the modest growth path. Yet, it is rather inhibited by the array of anxious imbalances, astonishing suppleness is reappearing. The Singaporean industrial production has documented additional month of promising growth in April 2007, reinforced by the protuberant performance in electronic classification besides PMI reading for the quarter 2 hence additionally gesturing the expansionary conditions (Chew, Ng & Fan, 2016). Though, the latest exports data on the economy of Singapore points towards external demand for its products cushioning the slowdown of the quarter-one could be chilling, it would then weigh manufacturing activities.
Weak wage growth but still huge household indebtedness locally tolerate to confine private consumption, even in the face of April’s second month of promising growth retail sales to particular improvement in a row. The expenditure by household has been excruciating from close correction in houses’ prices since hitting its peak in 2013. This correction appears not to be easing because of indication that volumes of transaction continually grow.
The current prices real GDP in Singapore stands at 291.9 billion USD. This has grown from 100.7% billion USD in year 1997 to 296.97 billion USD in year 2016. It has been growing averagely at the rate of 6.3% per year. The Singaporean real-GDP propagated 2.5 percent YOY 2017 June following a growth of 2.5 percent in previous quarter. Singaporean real-GDP growth YOY data quarterly updated from year 1976 to 2017 June indicates a mean rate of growth 7.50 percent. The growth rate of real GDP hit an all-time higher of 19.0 percent in 2010 June and a record time low of negative 8.8 percent in 2009 March. The Singaporean real-GDP per-capita in current prices is 51, 431.0 US dollars in year 2017. Singaporean real-GDP per-capita prolonged from 26, 387.4 billion USD in year 1997 to 52, 960.730 billion USD in 2016 skyrocketing averagely at the rate of 4.2 percent annually.
The economy of Singapore recovered in quarter-two, however, it declined beneath the market anticipation. The Singaporean economy resumed the growth in quarter-two of 2017, primarily on backdrop of the huge manufacturing activities. The upshot followed the contraction in first-quarter which stood principally wedged by base impacts because of inspiring growth of quarter-four, and by outmoded Singapore’s GDP numbers volatility. As a result of huge estimates that the Ministry of Trade and Industry published on 14th July, the GDP grew by 0.4% in second-quarter from previous quarter at SAAR), likening to first-quarter’s reviewed 1.9% contraction (previously reported: -1.30 percent qoq SAAR), yet lessening beneath market expectations.
The rebirth followed the manufacturing sector hastening besides the reversals in the services and construction businesses. Manufacturing grew 2.40 percent qoq SAAR, upwards from the first-quarter mild 0.4% rise. On the other hand, the service industry expanded 0.4% qoq in second quarter, relative to previous 2.70% construction of the previous year. The construction industry also recovered in qoq footing, growing 4.3% in 2nd quarter, subsequent to sharp 14.4% contraction witnessed in first quarter.
The GDP expanded 2.50% in quarter two in year-on-year basis thereby matching the first quarter‘s revised 2.50 percent growth (past reported: +2.70 year-on-year) alongside Focus Economics Consensus Forecast. The growth arose following an eighty percent expansion in manufacturing industry (first quarter: +8.50% YOY), led by the electronics growth and precision engineering clusters. The manufacturing expansion as indicated in the previous quarter, remained underpinned by the stronger external demand for the semiconductors alongside being manifested in encouraging figures for the industrial production that expanded for 10th month in a row in May.
The service industry growth on YOY terms, augmented from 1st quarter’s 1.40 percent to 1.70 percent in quarter two. Firmer demand superficially accounted for the minor acceleration hence benefiting transportation and succeeding storage and business service sub industries. Construction industry on the contrary continued with contraction per annum in quarter 2 and decreased 5.60% that represent a minor improvement from quarter one’s 6.10% contraction. Both public- and private sector construction activity continued to weigh on negative performance of construction industry which is still suffering property prices correction consequences that started subsequent to the climax in 2013 and remains gradually demonstrating softening indications (Seetharaman, Niranjan, Patwa & Kejriwal, 2017). The organizations continued to benefit from the up-to-date development in global trade alongside huge expansion in the electronic production happening starting fourth quarter 2016 while more domestic-focused sectors stayed affected by the gulping conditions domestically.
The Singapore’s economic growth is perhaps to remain lukewarm ahead, drawing from continuing recovery witnessed in external sector but excruciating from weaker demand locally. The efficient infrastructure of the Singapore, significantly transparent regulatory environment, low burden on taxation and steady governance make this economy momentously dynamic and resilient (Tat & Toh, 2014).
Deteriorating condition in labor market, continuing property market faintness besides plodding productivity gains is weighing on the spending by household, while low oil prices and rising interest rates in the US pose downward risks to the economy’s outlook. The Monetary Authority of Singapore anticipates GDP to cultivate at a rate ranging one- and three percent in 2017. Focus Economics Consensus Forecast (FECF) is protrusive that the economy will grow 2% in 2017 that is unchanged from preceding 2 month. The rate of growth is probable to hasten somewhat to 2.1%.
The trends in performance of this economy is comprehended via climate change alongside scarcity of resources, technological advancement, international economic power shifts alongside swift urbanization. The economy stays within the convergence of China strengthening its supremacy in trade in both the United States and Asia turning to Asia through its successful TPP negotiations conclusion. Such chief shifts makes Singaporean economy in a distinct position for opportunities capitalization. Swift urbanization leads to major implication for Singaporean business (Ng & Austin, 2016). Singapore has to view its relationships with regions, economies and cities.
The government of Singapore has embraced economic growth and development strategy as the means employed in the achievement of the output performance at level of national under MTI formulation. Such agencies have led to reformations alongside transformation. The recent push by Singaporean administration for economic consolidation for stronger sustainable long term growth is premised on such strategies described in the report of economic strategies committee in 2010. Accordingly, the administration orients on economic growth via skills together with innovation. This anchors the economy as an international –Asia Hub.
The unemployment adjusted rate in country pegged at 2.2 percent in 2017 March quarter as compared to preface estimations of 2.30 percent and undistinguishable to preceding quarter. The unemployment rate stayed at its record high commencing fourth quarter 2010, as extra individuals entered into labor-force while the total employment contracted mostly starting second 2009’S quarter. The rate of unemployment in Singapore averaged 2.5 percent from the 2005 till 2017, reaching its all-time high 6.0% quarter one of 1986 and an all-time lowest of 1.40 percent in 1990’s 2nd quarter.
In three months through March, the rate of an unemployment stayed constant from the preceding quarter for the residents (3.2 percent) alongside citizens (3.5 percent). A decline of 6,800.0 was witnessed in total employment subsequent to 2,300.0 increment in quarter four and striking highest quarterly shrinkage commencing 2009’s June quarter. The decline took place in manufacturing negative 4,300 whereas construction negative 12,500 primarily due to a decrease in the Work Permit Holders while service industry experienced 9,900.0 increment in the employment in service sector. About 4,000 employees were laid off, short of 5,440.0 employees in quarter of December and undistinguishable period the preceding year was positive 4,710.
The manufacturing retrenchments declined (890.00 from 1,990 in third quarter and reached lowest starting 2015’s second quarter (870.00) while services dropped (2,440.00) from 2,840.00. In contrast, construction documented more layings-off (660.00 from the 580.00). Services (61 percent) made bigger proportion of all layoffs, primarily in wholesale trade (13.00 percent), financial services (12.0 percent) and professional services (12.0 percent). The rate of re-entry among residents caused layoffs to stand at 64.4 percent, compared to 64.7 percent in the preceding quarter.
The vacancies numbers for jobs (adjusted seasonally) among the private-sector businesses with a minimum 25 employees while public sector job vacancies declined somewhat in 2007 March. However, vacancies among small private sector business employing below 25 workers surged bringing the total vacancies for economy to increase to 45,300.00 from 44,500.00 in the third quarter. Accordingly, seasonally adjusted job vacancies to unemployed people enhanced somewhat subsequent to seven quarters of drop in a row. The seasonally adjusted rate of employment dropped to 2.1 percent in quarter one of 2017 subsequent to the uptick in preceding three months. The rate of employment has stood on an overall downtrend starting third quarter of 2014. In the meantime, the rate of unemployment remained stable at 1.8 percent starting 2016.
Unemployment is indicates a situation in which people that lack jobs, have searched for the work actively in preceding four weeks cannot land work at predominant wage rate and remain currently accessible for work. The unemployment types in this economy entail cyclical, structural as well as frictional. The cyclical unemployment remains the major unemployment trigger in Singapore economy because the country enjoys an enormous external sector and stays largely dependent on the external demand for economic growth (Tan, 2015). The electronics manufacturing in Singapore exports hugely in a global perspective. Companies that produce electronics face a reduced demand in presence of a declining global demand for electronics. Because of small size of Singapore alongside its open economy it heavily dependent on exports thus a decrease in exports, will see Singaporean Aggregate Demand will decrease thereby shifting leftwards thus sinking national output alongside income, while swelling cyclical unemployment. Singapore economy is engaged in enormous restructuring due to globalization, and during structural unemployment could supervene. Singapore has shifted to capital intensive from labor intensive economy hence diverse skills are required. Workers who lack relevant training alongside expertise necessary for moving to the diverse sector are laid off thereby leading to structural unemployment. The frictional unemployment takes place because much time is required for people to acquire new jobs where they shifts jobs or looking for appropriate jobs. Both job creation and destruction presents a need for people to search for jobs and for businesses to look for workers hence a period lag is observed (Teo, 2015).
The Singaporean government has effected a range of measures to reach full employment. The administration uses programs of targeted employment to hit full employment. The government, therefore, has embraced policies that particularly direct jobs to high unemployment regions. The administration applies public alongside non-profit employment programs thus establishing jobs via accomplishment of unmet needs (Ling, 2016). The administration is further utilizing both public investment and infrastructure. The administration has recognized shortcomings of public investment within broadband; R&D; transportation as well as education. Accordingly, the administration is embracing sustained public investment programs for job creation, productivity and growth increase via budget policy as a technique that enables the government to uplift productivity as well as bring the Singapore’s economy nearer to full employment.
The consumer prices in Singapore arose 1.4 percent YOY in year 2017 March compared to 0.4 percent upsurge in preceding month and in accordance with the market consensus. This stood the highest rate of inflation commencing 2014 June, pushed by upsurge in housing cost alongside a rapider rise in prices of food. The essential prices of consumer that discriminates the accommodation alongside private road-transport cost went upward 1.6 percent, subsequent to 1.7 percent gain in preceding month as well as aligning to expectations of market. Based on month-on-month, the prices of consumer surged 0.3 percent subsequent to a decrease 0.3 percent in April. The inflation rate in economy stood at 2.65 percent on average from 1962 through 2017, reaching an all-time high of 34 percent in 1974 March and a record low of -3 percent in 1976 September as indicated below:
Inflation describes a steady rise in general prices levels for the basket of goods and services over a particular time period. This is triggered by an array of reasons including AD upsurges at higher rate above AS alongside import price-push inflation.
Where AD increases swifter than AS observed in diagram overhead, there remains the tendency that Singaporean economy general level of prices shall upsurge thereby triggering inflation. Singapore’s inflation is further provoked by import price-push inflation. It remains the predominant trigger of inflation in this economy. As a small and open economy with less natural resources, Singapore economy remains heavily reliant on imports from additional economies including China and Malaysia, with export and import expenditure more than there-times Singapore’s GDP (Tremewan, 2016). This means that where inflation rate in Malaysia or China is higher comparatively, the economy import natural resources at relatively greater prices which consequently provoke an increase in price of a given commodities basket. There will be thus an inflation as a result of import-price-push inflation.
The government of Singapore keeps the close watch on the development in price of the consumer from both domestic and imported inflation based on several mitigating measures. The MAS has permitted Singapore dollar to appreciate to assist in the mitigation of higher import prices like oil and food. The NEA plans at adopting management models which can assist keep low costs to ensure prepared food cost are affordable. Retail Price Watch Group keeps the close watch on excessive increases in price of food and daily necessities. The Ministry of National Development (MND) has undertaken substantial moves to enhance supply of BTO HDP flats alongside private residential property. Regular review of HBD subsidies is done to make sure that public housing remain affordable for initial buyers. The government has implemented various demand management means and shall continue the monitoring of housing market. The government manages tight labor market impacts by working with unions as well as companies to increase productivity through the improvement in production process of firms and encouragement of workers to adopt upskilling.
Conclusion
Key areas of economy of Singapore among them analysis of production output performance, analysis of labor market and analysis of price level have been covered in the discussion. The Singaporean unemployment has been deeply examined by emphasizing the trends in unemployment on the basis of rates of unemployment alongside as major types of unemployment in Singapore. Inflation in Singapore has further been presented in terms of trends in inflation rate including major triggers of inflation.
References
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Economics, T. (2013). Singapore Unemployment Rate.
Goh, C. B. (2017). Education and the Making of the Singapore Economy. In Lee Kuan Yew’s Educational Legacy (pp. 117-125). Springer Singapore.
Hasli, A., Ho, C. S., & Ibrahim, N. A. (2016). An Examination of FDI in China, Singapore, and Malaysia. In Proceedings of the 1st AAGBS International Conference on Business Management 2014 (AiCoBM 2014) (pp. 489-499). Springer, Singapore.
Ling, S. (2016). Two Milestones for Singapore in the Next 50 Years. In SINGAPORE 2065: Leading Insights on Economy and Environment from 50 Singapore Icons and Beyond (pp. 156-160).
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