The Impact of the Global Recession on the Singapore Economy

Added on -2020-02-18

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Running Head: Global Recession and SingaporeThe Impact of the Global Recession on the Singapore Economy and the Policy ImplementsStudent NameInstitutional AffiliationCourse/NumberInstructor NameDue Date
Running Head: Global Recession and Singapore2The Impact of the Global Recession on the Singapore Economy and the Policy ImplementsIntroductionSingapore is a democratic state and is considered one of the most prosperous economies in the world (Heritage.org, 2017). Since it gained independence in 1965, it has been ruled by the People’s Action Party (PAP) (only a single party). The PAP has restricted the freedom of speech and that of assembly. However, it has embraced international trade and economic liberalization. The service sector has the highest contribution to its GDP although this economy is a major producer of chemicals and electronics. The major factor behind the success of the economy is that it’s legal and political environment has been stable and that it has implemented prudent macroeconomic policy. Most of the key sectors in this economy are state owned and the government’s involvement is substantial.However, despite being considered a prosperous nation, this economy is still suffering from impact of the 2008-09 global recession (Todayonline.com, 2017). The recovery has not been an easy process; and this is the case for many other nations. According to Mason (2017), the investors’ mindset are still being shaped by the aftermaths of the global recession. In order to answer the question effectively, we shall analyze the impact of the GFC specifically on the Singaporean economy. We shall consider all the policies the government policy makers implemented to get this situation under control. The GFC affected the Singaporean aggregate demand and led to a fall in the real output; the impacts shall be considered and policy actions shall be suggested. One of the policy actions announced in 2009 was the resilience package, we shall analyze the components of this package and its impacts on the economy.Causes of GFC in SingaporeThe GFC started in the US and spread to almost every other nation in the world. It was fast spread owing to the interrelatedness and interconnectedness of nations due to globalization. International trade is one of the major ties that raise this interrelatedness. Singapore depends more on its export for manufactured goods. According to Balakrishnan (2017), the beginning of GFC in Singapore was after the US and Europe’s consumer demand for manufactured goods started falling; its export sector was greatly hammered. Gow (2008) pointed out that the US and Europe were already falling into a recession or rather on it and this is explaining the reason for their reduced demand for exports. He also noted that the only economy that was expected to have
Running Head: Global Recession and Singapore3some continued growth was China because it had already put in place some regulatory measures and monetary policies.When the impacts of the GFC were spread to Asia, Singapore was the first economy to behit by the global economic slowdown owing to it’s over dependency on export to the developed economies (Loong, 2008). During that period, India and China were experiencing rampant growth and Asia was not expected to be hit much by the GFC; however, Singapore’s trade was much tied to the West economies that were experiencing slowing growth. The year 2009 was projected to be a difficult year for many economies. Min (2016) pointed out that this was the most difficult period for this economy.The GFC Impact on the Singaporean EconomyIn the 3rd quarter of 2008, the manufacturing sector in Singapore shrunk by 11.5% owing to the slump in pharmaceuticals. The GFC did not have a significant impact on the service and construction sector as there was a steady growth. Prime Minister Loong noted that the financial markets were gripped by fear and panic that would take long to subsidize. During the GFC, the Singapore’s unemployment rate rose to a high level, this is irrespective of over 200,000 job created in 2006-2007. The following graph shows the changes in unemployment rate in 2008-09.Fig: Singapore’s unemployment rate Source: Tradingeconomics.com (2017)The over 200,000 jobs created in Singapore in 2006-07 had led to the unemployment level falling to a low level of approximately 1.7% as can be observed above; this was on the 3rd
Running Head: Global Recession and Singapore4quarter of 2007. However this was not sustained as the rate started rising again on the 4th quarter of the same year. The highest unemployment rate was reached in 2009 of approximately 3.8%. Through policy measures and regulations, the unemployment rate was lowered to approximately 2.2% in 2010 and has been maintained at an average rate of 2% since then.Fig: Inflation rate in SingaporeSource: Tradingeconomics.com (2017)The inflation rate during the global recession was too low indicating that there was insufficient demand. The economy thus had to be stimulated by using expansionary policies.Fig: GDP growth rate in Singapore Source: Tradingeconomics.com (2017)

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