Singapore Growth Rebounds to Fastest in More Than a Decade

Singapore Economic Progress
Report
Current Event
The recent event that might impact the economy of Singapore is the
outbreak of disease caused due to Corona virus. According to the statement
made by the central bank of Singapore it is evident that the currency of the
country is going to weaken further due to the coronavirus outbreak. The
currency has already weakened by 0.8% against the US dollar. Thus, weakening
of currency impacts and economy in various ways and this in case of Singapore
there will be impacts too. Currency weakening makes the export products
cheaper and import products expensive in Singapore. Consequently, exporters of
the country will face increased demand and there will be employment in the
sector whereas the imports of the country will fall1. Thus, the price level of the
country will go up and causes inflation. The increase in export product sales will
contribute to boost the economy of the country. In addition to that there will be
fall in trade deficit2. Thus, it can be inferred that the economy will improve due to
fall in currency value. However, rise in inflation may and discourage the
consumption of the domestic people and thus the demand in the domestic
market may fall. Therefore, it can be inferred that export sector will be under
influence of currency weakening and the economic variables like inflation,
unemployment, trade balance and GDP definitely change due to this currency
weakening. However, the central bank of Singapore has said that it can allow
some weakening.
GDP Highlights
1 Prilepsky, I. "Factors of the dynamics of exports and import substitution after a
sharp weakening of the national currency."
Economic policy 3 (2017): 100-133.
2 Irwin, Neil. "What Is the Trade Deficit?."
The New York Times (2018).
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
-5%
0%
5%
10%
15%
20%
GDP Growth Rate
Year
GDP Growth Rate (%)

Figure 1: GDP growth rate of Singapore
Source: (Created by the Author)
In figure 1, it can be seen that Singapore has faced negative gross
domestic product (GDP) growth after 1980. The years in which negative GDP
growth rate has been recorded are 1985, 1998 and 2001. In 1985, the negative
growth rate of the country occurred due to recession3. It is the first recession
faced by the country after independence. The negative GDP growth in Singapore
in 1998 had occurred due to Asian Financial Crisis4. The crisis started in 1997 and
it continued till 1998. This crisis has caused the currency of the country to
depreciate by 25% and there was drop in property values by 40%. The dot-com
bust and fall in the electronic industry in Singapore had initiated recession and
thus was the main reason that caused economy of the country to fell below 0%
GDP growth rate.
Labour Market Highlights
Figure 2: Employment distribution in Singapore in 2008 and 2018
Source: (Created by the Author)
From figure 2, it is evident that in Singapore services industry provides
employment to the largest share of the residents those are employed in the
country. After services industry, it is the manufacturing industry that provides
the maximum number of employment in Singapore. Then comes the construction
industry and other category of industries in terms of providing employment. In
2008, out of total employed resident in the country 76% worked in services
industry, 17% in manufacturing industry, 6% in construction industry and 1% in
3 Eaton, Jonathan, et al. "Trade and the global recession."
American Economic
Review 106.11 (2016): 3401-38.
4 Harvie, Charles, and Tran Van Hoa.
The causes and impact of the Asian
financial crisis. Springer, 2016.
2008 2018
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
Employed residents Manufactruing Construction
Services Others
Year
Employment (in thousand)

others industry5. Therefore, more than 3/4th of the employed labour force worked
in services industry whereas the other three industries employed about 1/4th of
the employed labour force in the country. In 2018, the percentage of
employment increased in services industries to 84%. In the case of other three
industries, the percentage of employment has not increased. The manufacturing
industry faced the largest decline in employment. Employment declined by 27%
in the manufacturing industry from 2008 to 2018.
Price Movements
Figure 3: Consumer price index trend in Singapore
Source: (Created by the Author)
Figure 2 shows that the inflation rate has an upward trend since February
2017 with minor fluctuations. However, the inflation rate is not that much high as
it has been recorded that since 2017 the inflation rate has reached 1.4%. In this
case, January 2017 has been considered as the base month for the calculation of
monthly inflation rate in Singapore6. The good and services due to which the
inflation has caused in Singapore in the month of October 2019 are food, food
servicing services, housing and utilities, communication, education and
miscellaneous goods and services. However, among all these variables there is
one variable that has contributed the most, it means that the percentage change
in consumer price index (CPI) of that variable is the most. Therefore, from the
data it is evident that the variable that has contributed the most in the inflation
is communication service.
5 Thangavelu, Shandre Mugan. "Productive contribution of local and foreign
workers in Singapore manufacturing industries."
Journal of Economic
Studies (2016).
6 Tay, Darrell Jiajie, et al. "Bubbles are departures from equilibrium housing
markets: evidence from Singapore and Taiwan."
PloS one 11.11 (2016).
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
Months
Inflation rate (%)