1MACROECONOMICS ASSIGNMENT Table of Contents Introduction................................................................................................................................2 Singapore: Economic Profile.....................................................................................................3 Macroeconomic trends of Singapore over the years..................................................................3 a) GDP growth rate of Singapore...........................................................................................3 Reasons behind GDP dynamics in Singapore........................................................................6 b) Inflation Rate in Singapore................................................................................................8 Reasons behind inflation dynamics in Singapore..................................................................9 c) Unemployment dynamics in Singapore.............................................................................9 Reasons behind changes in unemployment rates in Singapore............................................10 Recommendation and Conclusion............................................................................................10 References................................................................................................................................12
2MACROECONOMICS ASSIGNMENT Introduction Overtheyears,theglobaleconomicpatternshavechangesandmodified considerably, much of which can be attributed to the international events like Globalization, Industrial Revolution, Liberalizations, which have contributed in making the global economy more integrated, inclusive and multi-dimensional. Apart from these phenomena, the changes in the global economic patterns have also been facilitated by the technological as well as infrastructural innovations (Arkolakiset al.2013). Over the last few decades, several developing economies have shown immensely impressive performance in all of the economic growth indicators and have thus emerged as the new future dominating economies in the global framework with immense potential and growingeconomic,commercialandindustrialtrends(Berendsenetal.2013).These emerging economies primarily include several Asian countries, primarily including the economies of Hong Kong, South Korea, Taiwan and Singapore, together who are known as the “Four Asian Tigers”. Inthiscontext,theeconomyofSingaporecanbeconsideredasoneofthe significantly growing economies, showing immense potential as one of the dominating economies in the near future, much of which can be attributed to the robust government policy frameworks, the industrial development as well as the huge technological innovations whichthecountryhasexperiencedovertheyears(Palley2012).Keepingthisinto consideration the report tries to analyse the dynamics of the economy of Singapore and the performance of its macroeconomic indicators over the past twenty years, trying to understand the reasons behind the dynamics in the concerned macroeconomic parameters. The report also tries to recommend several policies and strategies for further improvement of the concerned country.
3MACROECONOMICS ASSIGNMENT Singapore: Economic Profile As discussed in the above section, Singapore is one of the predominantly developed economy in the contemporary global scenario. Being primarily a market economy, Singapore has grown to be the most open economy in the world with an overall pro-business, pro- industrialenvironment and is popular for its very low level of corruption rates (Tremewan 2016). The country ranks third across the globe in terms of Purchasing Power Adjusted per- capita GDP. The country is known for its pro-active and economic development enthusiast government has also enjoyed the fruits of the presence of same. These economic prosperity and development of all the sectors of the country, however, did not happen abruptly and have been a constant and prolonged growth process with considerable fluctuations and dynamics (both positive as well as negative) (Rodan 2016). Macroeconomic trends of Singapore over the years This section of the report tries to analyse the dynamics and trends in the performance of the significant macroeconomic indicators of Singapore, primarily those of the GDP growth, inflation and unemployment trends in the economy over the last two decades, which are discussed in the following section. a) GDP growth rate of Singapore One of the primary indicators of economic growth and prosperity of any country at a particular point of time is the Gross Domestic Product of the country at that point, which in turn is the sum total of the monetary value of all the commodities and services which are produced within the geographical domain of the concerned country within a particular period of time, usually one economic year (Mohamad 2015).
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4MACROECONOMICS ASSIGNMENT In this context, the GDP trends of Singapore over the last twenty years can be seen as follows: Figure 1: GDP of Singapore (1997-2018) (Source: Tradingeconomics.com 2018) As is evident from the above figure, the GDP of the country has significantly and steadily increased over the last two decades, with the increase being faster and more visible post 2005. The GDP of the country has maintained a stable positive trend which in turn indicates towards the overall increase in productivity as well as economic prosperity of the country over the last few years (Nolan 2012). The trend, however, becomes even more prominent when the growth rate of the GDP of the country is seen, which is as follows:
5MACROECONOMICS ASSIGNMENT Figure 2: GDP Growth Rate of Singapore (1997-2018) (Source: Tradingeconomics.com 2018) From the above figure it is evident that the although the GDP of Singapore has increased steadily with time, the growth rate of the same has however been subjected to considerable fluctuations (both positive as well as negative) with time. The most prominent negative trend can be observed within the period of 2007-2009, after which, the country can be seen to make up for the negative growth rate quite abruptly as can be observed from the growth rate trends of GDP of the country, which shows the highest peak to be occurring in 2011-2012 (Ariff and Hill 2012). A more accurate measure of the economic well being of a country is the per-capita GDP growth rate of the country with time, which to some extent help in understanding how economically well off the population of the country is.
6MACROECONOMICS ASSIGNMENT Figure 3: Per capita GDP growth rate in Singapore (1997-2018) (Source: Tradingeconomics.com 2018) The per capita growth rate of GDP of Singapore can be seen to be highly impressive, as the above figure shows. In the recent period the per-capita GDP of Singapore and its growth rate has even surpassed the same of the most influencing economies in the global scenario, the economy of the USA, which in turn implies that in terms of productivity and economic abundance Singapore has been emerging as a leader over the last two decades (Lee 2012). Reasons behind GDP dynamics in Singapore From the above discussion it can be seen that the in a general framework, the GDP statistics of Singapore and its growth trends have been highly impressive over the last few years in spite of the considerable positive as well as negative fluctuations present in the growth rate of the same during the period taken into consideration. These robust GDP growth trend can be attributed to the economic patterns of the country over time and also to the different types of contributing sources of the growth of the same over the years. The huge growth of the GDP is highly and most significantly attributed to the “Open Economy” Model which the country follows. The pro-industry, pro-trade
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7MACROECONOMICS ASSIGNMENT framework of the country has helped the growth of trade as well as the inflow of huge FDI in the country over the years, which can be seen as follows: Figure 4: Net FDI Inflow in Singapore (1997-2017) (Source: Tradingeconomics.com 2018) As is evident from the above figure the general trend of the net inflow of FDI in the country has been positive, barring a few fluctuations, the most prominent one being during 2007-2008. This in turn has facilitated the increase of accumulation of capital in the country over the years, which in turn has facilitated the growth of capital-intensive highly profitable industries in the economy, augmented by the technological innovations, together which has contributed to the development of the economy over time as can be seen from the impressive GDP statistics (Patra and Sahu 2012). Apart from that the overall skill of the labour as well as the increase in the amount of labour input has also led to the growth of the GDP over the years. The GDP growth dynamics of Singapore can however be seen to be negative in 2007- 2009, which may be in all probability due to the Global Financial Crisis which occurred at that point, originating in the USA and affecting almost all the economies across the globe including the economy of Singapore. This huge financial crisis led to an acute recessionary
8MACROECONOMICS ASSIGNMENT situation in the economy of the concerned country as can be seen from the negative trends in the GDP dynamics of the country at that point of time. However, the recessionary situation did not stay for long in Singapore and the country, with its robust stabilizing policies, flourishing industries and technological innovations, brought its economy back on trace quite impressively and abruptly. b) Inflation Rate in Singapore The inflation prevailing in a country shows the overall price level of the commodities and services in the country which in turn is an extremely significant indicator for the economic wellbeing of the same (Patra and Sahu 2012). While a very high level of inflation hurts the population of the country in terms of decrease in the value of money, a very low inflation is also detrimental for the health of the economy as it leads to loss of productivity and leads an overall stagnation. In this context, the changes in the inflation rate of Singapore, over the last two decades, can be seen as follows: Figure 5: Rate of Inflation in Singapore (1997-2018) (Source: Tradingeconomics.com 2018)
9MACROECONOMICS ASSIGNMENT As is evident from the above figure, the inflation rate in Singapore, over the last two years, has seen considerable dynamics (both positive as well as negative). However, the magnitude of the fluctuations in the inflation rate of the country is not observed to be highly striking or alarmin, barring one huge increase in the same in 2008. Reasons behind inflation dynamics in Singapore As is evident from the above figure, the level of inflation went significantly up in 2008, which can be attributed to the economic turmoil at that point of time. However, the inflation in the recent period has surged up, much of which can be contributed to the increase in the cost of living, including higher cost for accommodation, transports as well as stricter labour market mechanisms which induce the firms to pay higher wages to the labour, which in turn increases the cost of production in the country (Sivalingam). c) Unemployment dynamics in Singapore The labour market conditions and the level of unemployment in a country also act as major indicators of the condition of the economy as the overall productivity, capacity as well as standard of living and consumption and investment habits depend on the same. Figure 6: Unemployment rate in Singapore (1997-2018) (Source: Tradingeconomics.com 2018)
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10MACROECONOMICS ASSIGNMENT The level of unemployment in Singapore, which can be found to be considerably high in the first half of the concerned period, decreased considerably over the last few years as is evident from the above figure, with the rates hovering between 2%-2.5% in the recent period. Reasons behind changes in unemployment rates in Singapore The primary reason behind the considerable decrease in the unemployment rates in the country over the last few years can be considered to be the immense industrial and commercial development of the country, which in turn can be attributed to the growth of new and wide ranged industries inside the country as well as entry of foreign multinational companies with time (Wong 2016). This in turn has led to the creation of huge employment scopes in the country, which clubbed with the increase in the number of skilled labours in the country, thereby leading to a decrease in the unemployment rate, which may also be one of the causes of considerable inflation in the country. Recommendation The government should focus on primarily fiscal side policies like increasing the supply of the health care, accommodation, infrastructural facilities as well as transport facilities. The government of the country should also provide subsidies to both the producers as well as the customers of these products in order to encourage the producers to supply more and bring cost and price efficiency in the market, thereby lowering down the inflation rates in the economy. Conclusion As is evident from the above discussion, the economy of Singapore has developed considerably over the last two decades, especially in terms of GDP, per-capita GDP growth and decrease in unemployment rates, which in turn indicates towards the fact the country has been experiencing a booming economy in the recent periods. However, this boom has led to
11MACROECONOMICS ASSIGNMENT an increase in the overall price level in the economy, especially in the last few years, which in turn can be seen to be affecting the population of the country in terms of high cost of living. This aspect has to be taken into consideration by the government of the country, especially in theaspectsofcommoditiesandservicesofnecessitylikehealthcare,transportand accommodation. References Ariff, M. and Hill, H., 2012.Export-oriented industrialisation: The ASEAN experience. Routledge. Arkolakis, C., Ramondo, N., Rodríguez-Clare, A. and Yeaple, S., 2013.Innovation and production in the global economy(No. w18972). National Bureau of Economic Research. Berendsen, B., Dietz, T., Nordholt, H.S. and van der Veen, R., 2013.Asian tigers, African lions: comparing the development performance of Southeast Asia and Africa. Brill.
12MACROECONOMICS ASSIGNMENT Lee, C.G., 2012. Tourism, trade, and income: Evidence from Singapore.Anatolia,23(3), pp.348-358. Mohamad, K., 2015.Malaysia-Singapore: Fifty Years of Contentions 1965-2015. The Other Press. Nolan, P., 2012. China and the global economy. InCharting China's Future(pp. 55-64). Routledge. Palley, T.I., 2012. The rise and fall of export-led growth.investigación económica, pp.141- 161. Patra,S.andSahu,K.K.,2012.InflationinSouthAsiaandIt'sMacroEconomic Linkages.Researchers World,3(3), p.10. Rodan, G., 2016.The political economy of Singapore's industrialization: national state and international capital. Springer. Sivalingam, G., Singapore| 25 Mar 2013. Tradingeconomics.com (2018).Singapore Foreign Direct Investment - Net Inflows | 1995- 2018|Data.[online]Tradingeconomics.com.Availableat: https://tradingeconomics.com/singapore/foreign-direct-investment [Accessed 8 May 2018]. Tradingeconomics.com (2018).Singapore GDP | 1960-2018 | Data | Chart | Calendar | Forecast|News.[online]Tradingeconomics.com.Availableat: https://tradingeconomics.com/singapore/gdp [Accessed 8 May 2018]. Tradingeconomics.com (2018).Singapore GDP per capita | 1960-2018 | Data | Chart | Calendar|Forecast.[online]Tradingeconomics.com.Availableat: https://tradingeconomics.com/singapore/gdp-per-capita [Accessed 8 May 2018].
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13MACROECONOMICS ASSIGNMENT Tradingeconomics.com (2018).Singapore Inflation Rate | 1962-2018 | Data | Chart | Calendar|Forecast.[online]Tradingeconomics.com.Availableat: https://tradingeconomics.com/singapore/inflation-cpi [Accessed 8 May 2018]. Tradingeconomics.com (2018).Singapore Unemployment Rate | 1986-2018 | Data | Chart | Calendar.[online]Tradingeconomics.com.Availableat: https://tradingeconomics.com/singapore/unemployment-rate [Accessed 8 May 2018]. Tremewan, C., 2016.The political economy of social control in Singapore. Springer. Wong, S.C., 2016. Transformation of employment patterns and need for career services in modern Singapore.The Career Development Quarterly,64(3), pp.287-299.