The Impact of the Global Recession on the Singapore Economy

Added on - 18 Feb 2020

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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 economiesin the world (Heritage.org, 2017). Since it gained independence in 1965, it has been ruled by thePeople’s Action Party (PAP) (only a single party). The PAP has restricted the freedom of speechand 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 majorproducer of chemicals and electronics. The major factor behind the success of the economy isthat it’s legal and political environment has been stable and that it has implemented prudentmacroeconomic policy. Most of the key sectors in this economy are state owned and thegovernment’s involvement is substantial.However, despite being considered a prosperous nation, this economy is still sufferingfrom impact of the 2008-09 global recession (Todayonline.com, 2017). The recovery has notbeen 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 toanswer the question effectively, we shall analyze the impact of the GFC specifically on theSingaporean economy. We shall consider all the policies the government policy makersimplemented to get this situation under control. The GFC affected the Singaporean aggregatedemand and led to a fall in the real output; the impacts shall be considered and policy actionsshall be suggested. One of the policy actions announced in 2009 was the resilience package, weshall 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 wasfast 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 dependsmore on its export for manufactured goods. According toBalakrishnan (2017), the beginning ofGFC in Singapore was after the US and Europe’s consumer demand for manufactured goodsstarted falling; its export sector was greatly hammered. Gow (2008) pointed out that the US andEurope were already falling into a recession or rather on it and this is explaining the reason fortheir 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 measuresand 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 developedeconomies (Loong, 2008). During that period, India and China were experiencing rampantgrowth and Asia was not expected to be hit much by the GFC; however, Singapore’s trade wasmuch tied to the West economies that were experiencing slowing growth. The year 2009 wasprojected to be a difficult year for many economies. Min (2016) pointed out that this was themost difficult period for this economy.The GFC Impact on the Singaporean EconomyIn the 3rdquarter of 2008, the manufacturing sector in Singapore shrunk by 11.5% owingto the slump in pharmaceuticals. The GFC did not have a significant impact on the service andconstruction sector as there was a steady growth. Prime Minister Loong noted that the financialmarkets were gripped by fear and panic that would take long to subsidize. During the GFC, theSingapore’s unemployment rate rose to a high level, this is irrespective of over 200,000 jobcreated in 2006-2007. The following graph shows the changes in unemployment rate in 2008-09.Fig: Singapore’s unemployment rateSource: Tradingeconomics.com (2017)The over 200,000 jobs created in Singapore in 2006-07 had led to the unemploymentlevel 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 4thquarterof 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 approximately2.2% 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 insufficientdemand. The economy thus had to be stimulated by using expansionary policies.Fig: GDP growth rate in SingaporeSource: Tradingeconomics.com (2017)
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