Economic Analysis of Singapore

This document provides a detailed economic analysis of Singapore, covering various aspects such as production output performance, labor market analysis, and price level analysis. It includes insights into the GDP, GDP per capita, unemployment rate, and inflation rate of Singapore. The analysis highlights the strategies and policies implemented by the Singaporean government to overcome challenges and promote economic growth.

Running head: ECONOMIC ANALYSIS OF SINGAPORE
Economic Analysis of Singapore
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1ECONOMIC ANALYSIS OF SINGAPORE
Contents
Introduction:....................................................................................................................................2
Production Output Performance Analysis.......................................................................................2
Labour Market Analysis..................................................................................................................6
Price Level Analysis........................................................................................................................7
Conclusion.......................................................................................................................................9

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Introduction:
Singapore is an Asian nation with highly developed free-market economy. According to
purchasing power parity, Singapore has 39th highest GDP and the 3rd highest per capita GDP
(Nguyen, 2014). Singapore has not much land area which makes it poor in natural resources. In
Singapore, the categories of natural resources are the renewable resources, non-renewable
resources and water resources. In spite of this constraints, industries are growing as the
government of Singapore has taken initiatives to invest in infrastructure, upgradation of
technologies, conservation and management of water and strategies to manage water resources.
The main industries of Singapore are electronics, chemical, financial services, oil drilling
equipment, ship repair, offshore construction etc. the nonrenewable resources of Singapore are
coal, oil and natural gas which is available in very limit (Chiu, 2018). The economy of Singapore
was dependent on oil imports. To get rid of the problem of fuel oil imports, Singapore have
moved to natural gas which generates 80 percent of electricity. Singapore use biomass as a
source of renewable energy. Source of biomass energy is wood, animal waste and crops. Except
these all renewable resources, geographical location of Singapore which is in the equatorial belt,
makes Singapore potential to tap solar energy.
Production Output Performance Analysis
Real GDP, Real GDP growth and Real GDP per capita measures the performance of
product output of an economy. GDP is defined as the amount of total finished goods and services
produced in an economy within a certain period. There are two types of GDP: Nominal GDP and
Real GDP. The difference between these two GDPs is price adjustment. Price adjusted GDP is
called Real GDP. GDP growth is defined as the change in growth over time. If the economy is
growing, then the GDP growth rate is positive. Real GDP growth is inflation adjusted growth

3ECONOMIC ANALYSIS OF SINGAPORE
rated. Real GDP shows the growth of an economy by adjusting the inflation which makes it
better measurement than nominal GDP growth rate. GDP per capita is determined by the division
of GDP of an economy by the population of that economy. It measures the output of an economy
which is accounted for the population of that economy. Thus it is the best measurement for the
standard of living of an economy (Laubach & Williams, 2016). GDP is influenced by several
factors that are explained below:
Human Resource: The efficiency and availability of human resource directly affect the GDP of
an economy. The efficient labour produces more product than a normal labour. Similarly,
available labour increases the total output.
Natural Resources: Availability of natural resources helps to produce large amount of aggregate
output. Countries with enough natural resources like oil, natural gas and minerals produce more
goods than a country lacking with the natural resource. The efficient utilization of resources
depends on proper use of upgraded technology and skilled labour.
Capital Formation: Capital of a country includes the land, building, machines and
transportation. Production and utilization of these capital is called capital formation. Capital
formation increases the availability of per capita capital and capital labour ratio. This will raise
the productivity of a labour.
Advance Technology: Technology is a result off application of scientific methods and
production techniques. An upgrade in technology results in the rise of output with the use of
same amount of input. The right technology in right place have a great role in the growth of
GDP.

4ECONOMIC ANALYSIS OF SINGAPORE
Social and Political Factors: Social factor means the customs, tradition and belief that
contributes in the growth of GDP to a certain extent. As an example, adoption of modern
livelihood is restricted by the society with belief and superstations. Apart from this, political
factor has an important role in formulating and imposing policies for the GDP growth.
GDP of Singapore: The below figures shows the trend line of GDP of Singapore from 2008 to
2018. Overall trend shows the rise in GDP from the beginning. But there is a rise and fall like
every economy has and these fluctuations are very small. In the year, 2008 and 2009 there is a
fluctuation due to financial crisis of 2008. After 2010, the trend line is rising and significantly
steeper up to the year 2011.
Figure 1: GDP Constant Prices of Singapore from 2008 to 2018 (Singapore GDP Constant Prices
| 2019 | Data | Chart | Calendar | Forecast. 2019).
GDP per capita in Singapore: The below graph shows the GDP per capita for Singapore. The
trend line for GDP per capita is derived by dividing the GDP with population. The bars show a
sharp fall in GDP per capita in the year 2009. After 2010, the per capita GDP is rising over the

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year. In 2010, there is a great increment inn GDP per capita after recovering from the effects of
great depression. The overall trend shows that the per capita GDP is rising over the time.
Figure 2: GDP per capita of Singapore from 2008 to 2018 (Singapore GDP per capita | 2019 |
Data | Chart | Calendar | Forecast | News. 2019).
GDP Growth Rate in Singapore: The below graph shows the fluctuation in growth rate of GDP
in Singapore through a line over the year. There are 2 major changes in the growth rate in the
year 2009 and 2010. In 2008, the growth rate was falling and it was at its lowest point in 2009.
During the year 2009, it started rising. From 2010, it started falling at a low pace until 20017.
The lowest growth rate was recorded in 2009 and the peak was recorded in the year 2010.

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Figure 3: GDP growth rate in Singapore from 2008 to 2018 (Singapore GDP Annual Growth
Rate | 2019 | Data | Chart | Calendar | Forecast. 2019).
Labour Market Analysis
Unemployment is a situation where a potential full time employable individual is unable to get a
job at working age. There are various types of unemployment depending on the causes behind
unemployment. Such as, demand deficient unemployment cause by the lack of demand in the
economy for example unemployment in recession. Lack of skills or geographical immobility
causes the structural unemployment. High wage or greater than equilibrium wage causes real
wage unemployment (Rajan, 2014). Moreover, fictional, voluntary unemployment, seasonal
unemployment and disguised unemployment exists in the economy. Disguised unemployment is
referred to those individuals who are not counted in official unemployment statistics but their
marginal productivity is zero (Kaliyeva, et al. 2018).

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Figure 4: Unemployment (% of total labour force) of Singapore from 2008 to 2018 (Singapore
Unemployment Rate | 2019 | Data | Chart | Calendar | Forecast. 2019)
The above figure shows the trend of percentage of unemployment to the total labour force
of Singapore from 2008 to 2018. The unemployment was at its peak in the year 2009 at 3.3% and
the lowest unemployment was in 2013 and 2016 at 1.6%. After reaching the peak of
unemployment rate it started to fall in the year 2009. The economy was attacked by a number of
problems and faced the world depression as other developed countries which the percentage of
unemployment was high in the year 2009. In 2007, during inflation, jobs were created by the
foreign funds that were occupied by the non-Singaporeans (Teng & Gee, 2016).
Price Level Analysis
Inflation is a long term increase in the general price level of goods and services in an
economy. There are several reasons behind inflation. They are discussed one by one below:

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The Money Supply: A rise in money supply can cause the inflation. The value of money is
derived by the available amount of currency in an economy and the perception of the value of
money by the individuals of that economy (Ball, 2017). In other way, more availability of liquid
money in the hands of individuals raises the aggregate demand and thus prices go up.
The National Debt: The government has two choices when the national debt is high. One is
increasing tax and the other one is to print more money to pay the debt. Increase in taxes will
force the business and industries to raise the prices of the goods and services. The other choice,
printing money directly raises the money supply.
Demand-Pull Effect: The demand-pull effect of inflation is a demand side approach. When
there is a rise in wages of labours in the economy, individuals spend more money on consumer
goods. This raises the demand for the goods and services. To meet the balance of demand and
supply, firms will raise the price to the bearable level of consumer (Galí, 2015).
Cost-Push Effect: Cost-push effect theory states that when firms face a rise in input costs such
as rise in the cost raw goods or wages, they transfer the cost to the consumer in the form of
higher prices to maintain the profit (Takami, 2015). For an example, a rise in price of fuel oil
will definitely raise the fair of airplane and other transportations as they have to bear a higher
cost due to rise in the prices of oil.
Exchange Rates: Inflation can be influenced by the foreign exchange rate. In a global economy,
when exchange rate suffers, the domestic currency becomes less valuable compared to the
foreign currency. This raise the price of the foreign goods and services (Weale et al. 2015).
Simultaneously, domestic goods and services becomes cheaper in the foreign market and export
is also cheaper in that case.

9ECONOMIC ANALYSIS OF SINGAPORE
Figure 5: Inflation of Singapore from 2008 to 2018 (Singapore Inflation Rate | 2019 | Data |
Chart | Calendar | Forecast | News. 2019).
The above figure shows the inflation trend in Singapore from 2008 to 2018. The peak
point is in the year 2008 which means the inflation was highest in that year and the second
highest point is in the year 2011. The lowest inflation is recorded in the year 2016. The important
reasons behind the inflation in 2008 were the explosion of foreign funds in Singapore and
escalation of property prices. The CPI was around 8 percent which was highest in last 2 decades.
Moreover, oil prices had a role to play in the increase of price level. The central bank of
Singapore targeted the price stability and guided the monetary policy by managing the nominal
exchange rate. This strategy got priority over adjustment of interest rate. Singapore choose to
manage the relative value in comparison to other currencies. The appreciation of S$NEER
continued to adjust the cost and price pressures to the medium level through the essential lags in
the process of price transmission (Filardo, Genberg & Hofmann, 2016).

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Conclusion
Singapore has some disadvantages in terms of natural resources, land size and population
or the labour force. However, over the time it has managed to get rid of this natural problems by
investing in infrastructure, upgradation of technologies, conservation and management of water
and strategies to manage water resources. Singapore is a robust economy with the ability of
government policies and strategies to control and manage economic blunders. It is a growing
economy in terms of GDP, GDP per capita and employment. Over last decade the trend is
positively increasing for GDP and GDP per capita. The percentage of unemployment is also
decreasing over the last 10 years. In spite of facing recession, the economy of Singapore stood up
and caught the pace as before. There is government policies and strategies to increase the GDP
and employment like skill enhancement programmes for the people of Singapore, fiscal and
monetary policies. Again, the strategy to control the inflation rate during 2008 was tremendous.
It has controlled the inflation by adjusting the nominal exchange rate that means relative prices
has been adjusted compared to the value of other currencies rather than adjusting the interest
rate. The policy was reviewed and necessary changes have been taken in next 6 months
depending on the performance of the economy with the new policy. Again, it has moved to
natural gas and adopting the use of biomass energy to reduce the dependency on oil imports
which had an impact in bringing the inflation. Finally, it can be said that the Singapore with its
small land size, scarcity of natural resources and small labour force is growing with a good pace
and have great potential to be develop in future.

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Reference:
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Retrieved from https://tradingeconomics.com/singapore/gdp-growth-annual

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Singapore GDP Constant Prices | 2019 | Data | Chart | Calendar | Forecast. (2019). Retrieved
from https://tradingeconomics.com/singapore/gdp-constant-prices
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