Macroeconomics: Analysis of Singapore's GDP, Inflation, Wages, Saving and Short-term Fluctuations
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Added on  2023/06/09
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This article provides an analysis of Singapore's GDP, inflation, wages, saving and short-term fluctuations. It covers topics such as GDP and economic growth, inflation and price level, wages and unemployment, saving, capital formation, financial markets and financial system, and short-term economic fluctuations and aggregate expenditure.
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Running Head: MACROECONOMICS Macroeconomics Name of the Student Name of the University Course ID
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1MACROECONOMICS Table of Contents Analysis of topic 1: GDP and Economic Growth............................................................................2 Analysis of topic 2: Inflation and Price Level.................................................................................3 Analysis of topic 3: Wages and Unemployment.............................................................................5 Analysis of topic 4: Saving, Capital Formation, Financial Markets and Financial System............6 Analysis of topic 5: Short-term Economic Fluctuation and Aggregate Expenditure......................6 Conclusion.......................................................................................................................................7 References........................................................................................................................................8
2MACROECONOMICS Analysis of topic 1: GDP and Economic Growth Source https://www.channelnewsasia.com/news/business/singapore-gdp-economy-slows-q2-mti- advance-estimates-10525080 Summary In the second quarter, economic growth in Singapore failed to achieve the expected growth rate. The recorded economic growth declined to 3.8 percent from the level it was in one year ago. The advanced estimates as stated by the Ministry of Trade and Industry (MIT) explained the recent slowdown in economic growth following a loss in momentum in both manufacturing and service sector. This quarter manufacturing sector accounting a growth of 8.6 percent as against 9.7 percent in the last quarter. The service sector growth has also been moderated to 4.0 percent as compared to 3.4 percent in the first quarter (channelnewsasia.com 2018). Another factor threating economic growth in Singapore is the ongoing trade tension among China and US. Analysis Aggregate output of a nation is measured using the indicative measure of Gross Domestic Product.Itpresentsvalueofallgoodsandservicesinmonetaryterms.Agriculture, manufacturing and service are the three pillars that contribute to GDP (Goodwinet al.2015). Slow growth in manufacturing and services are mainly responsible lower than expected growth rate in Singapore. The decline in both the sector is mainly contributed from a declining demand for these sectors. The trade tension between US and economy threats economic growth in Singapore by reducing its export demand. A decline of import in US or China by 10 percentage point can cause 1 or 2 percent decline in export of Singapore. Figure 1: Slow growth in Singapore (Source: as created by Author)
3MACROECONOMICS Analysis of topic 2: Inflation and Price Level Source https://www.businesstimes.com.sg/government-economy/singapores-inflation-up-in-may-in-line- with-economists-expectations Summary Headline inflation in Singapore increased in May giving expectation of further increase over the year. The Consumer Price Index rose to 0.4 percent as compared to 0.1 percent in the month of April. Core inflation increased at an even faster rate with CPI grew by 1.5 percent year on year basis from an increase of 1.3 percent in the previous month. The rise in both core and headline inflation caused by increase in prices of all major categories of CPI basket excluding food (businesstimes.com.sg 2018). Headline inflation picked up mainly due to an increase transportation cost. Service inflation and retail price also increases in the same time. Analysis Inflation is the phenomenon of a gradual rise in the overall level of price. In Singapore both headline and core inflation are going at a faster pace. The core inflation measures exclude cost of road transport and accommodation. The development of trend consumer price is given in the figure below Figure 2: Consumer Price development (Source:businesstimes.com.sg 2018)
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4MACROECONOMICS Both demand and cost side factors explain the ongoing inflationary pressure for Singapore. Inflation caused due to an increase in aggregate demand is known as demand-pull inflation. Speeding of domestic demand consumer prices to rise in Singapore. Inflation resulted from an increase in cost of production is known as cost-push inflation (Bernanke, Antonovics and Frank 2015). Growth in labor wage led to an increase in production cost leading to cost push inflation in Singapore. Figure 3: Demand-Pull Inflation (Source: as created by Author) Figure 3: Cost-Push Inflation (Source: as created by Author)
6MACROECONOMICS The economy therefore should focus on enhancing productivity growth along with sustained increase in wage to stabilize the condition of labor market. Analysis of topic 4: Saving, Capital Formation, Financial Markets and Financial System Source https://www.theedgesingapore.com/millennials-most-savings-savvy-generation-singapore-finds- uob-study Summary Based upon the transaction pattern of United Overseas Bank (UOB), it is stated that millennials in Singapore are outpacing their previous generation in terms of saving. For a period between middle of 2015 and middle of 2018, saving for millennials accounted a 31% growth as reflected from average account balance of them. This indicates the growing tendency of saving and investment for this generation. Saving rate for generation X is growing at a rate of 11% with account balance for baby boomers remaining almost flat (theedgesingapore.com 2018). Analysis Saving constitutesan important part of aggregate demand. An increase in saving indicates an increase in availability of investible fund. With an increase in investment, the economy moves towards a path of economic expansion. National saving of a nation is made up of private and public saving. Private saving is the difference between income and expenditure (Bernanke, Antonovics and Frank 2015). The millennials in Singapore constitutes a growing tendency towards saving and investment. Growth of average account balance of millennials far exceeds that of their previous generation and baby boomers. The growing saving is expected to bring economic growth by raising aggregate demand. Analysis of topic 5: Short-term Economic Fluctuation and Aggregate Expenditure Source https://www.thestar.com.my/business/business-news/2018/07/13/singapore-q2-gdp-growth- slows-as-trade-tensions-cloud-outlook/ Summary Economic growth in Singapore is currently at stake due to emergence of trade tension between US and China. This indicates a possibility of growth fluctuation in upcoming days. The economic growth in the second quarter has reached below the forecasted rate (thestar.com.my 2018). Trade constitutes an important part of Singapore’s GDP. The declining import from US and China a hurt economic growth of Singapore putting the economy to the risk of recession. Analysis Business cycle in an economy describes the alternative phase of economic expansion and contraction(Goodwinet al.2015). Trade plays an important role in the economy of Singapore. After a fast pace growth in the last, the economy of Singapore is now under the cloud of trade tension, which can possibly hamper further economic growth of Singapore. Following the trade tension, a decline in import in China and US, significantly reduces export demand of Singapore
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7MACROECONOMICS causing a decline in net export. Net export being an important part of aggregate demand can cause a loss in momentum for Singapore. The Singapore economy thus can enter in a recession unless the economy activity speeded up in the next quarter. Conclusion The Singapore economy in the second quarter experienced a slow growth as compared to that in the previous year. The low growth in the economy caused due to contraction of manufacturing and service sector. Price level in the economy is rising upward as indicated from an increase in both headline and core inflation. Real wage is growing but it lags behind the productivity growth, which can cause unemployment in future by raising cost of production. Millennial in Singapore tends to be save and invest more as compared to others group in the economy. Finally, US-China trade tension threats the economic growth in Singapore for the coming days.