Macroeconomic Analysis of Singapore's Economy: 2005-2018 Report

This report provides a comprehensive analysis of Singapore's economic performance from 2005 to 2018. It examines key macroeconomic indicators, including real GDP, GDP growth rate, GDP per capita, unemployment rate, and inflation rate, to assess the country's economic health. The report delves into the trends of these indicators, providing explanations for observed fluctuations and analyzing the impact of events like the Global Financial Crisis. Furthermore, it explores the different types of unemployment prevalent in Singapore and discusses the government's measures to achieve full employment, stable prices, and sustainable economic growth, including fiscal stimulus packages and workforce development initiatives. The analysis covers various aspects of the economy, from production output and labor market dynamics to price level changes and the government's role in fostering economic stability and progress. The report concludes by summarizing the key findings and offering insights into the overall economic trajectory of Singapore during the specified period.

Running head: ECONOMICS
Economics
Name of the Student
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Table of Contents
1.0Introduction...........................................................................................................................2
2.0 Production Output Performance Analysis............................................................................2
2.1 GDP..................................................................................................................................2
2.2 GDP growth rate..............................................................................................................3
2.3 GDP per capita analysis...................................................................................................4
2.4 Government measure to achieve the output performance................................................5
3.0 Labor Market Analysis.........................................................................................................5
3.1 Types of unemployment...................................................................................................6
3.2 Unemployment trend in Singapore..................................................................................7
3.3 Government measure to achieve full employment...........................................................8
4.0 Price Level Analysis............................................................................................................8
4.1 Inflation trend in Singapore.............................................................................................8
4.2 Causes of Inflation...........................................................................................................9
4.3 Government measure to achieve stable price.................................................................10
5.0 Conclusion..........................................................................................................................11
6.0 References..........................................................................................................................12

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1.0Introduction
The Singapore’s economy is one of the most highly developed mixed market
economy. The economy of Singapore is ranked as one most open nation in world. Singapore
holds the third position in terms Purchasing Power Parity. In the nation, state owned
enterprise plays an important role. The country is one major financer of Foreign Direct
Investment in the world. Inward foreign direct investment also plays an important role in the
country. Stable economic and political environment help to attract foreign funds in the
country. Earnings from export such as chemicals, electronics and service is the economy’s
main source of revenue. The revenue earned from export helps to purchase raw materials and
natural resources. In order to maintain the competitive position despite increasing wage,
Singapore’s government aims to promote high value added service. Government has opened
to telecommunication, financial service, retailing and power generation sector to foreign
service providers (Chiu, 2018). The report conducts a research report on economic
performance of Singapore from the year 2005 to 2018. The economic performances of
Singapore are analyzed applying macroeconomic indicators real GDP, growth rate of real
GDP, real GDP per capita, unemployment and inflation. In addition to discussing economic
performance the paper also discusses policies of government to achieve stable growth,
employment and stable price.
2.0 Production Output Performance Analysis
2.1 GDP
Gross Domestic Product refers to a monetary measure of market value of all final
goods and services produced within the nation. Values of goods and services are measured
using the market price of produced goods and services. In estimating GDP, either market
price of current price or market price of a fixed base year is used. Computed GDP using

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market price of current year is termed as nominal GDP while estimated GDP using base year
price is called real GDP.
2.2 GDP growth rate
Growth rate of GDP measures how fast a nation is growing. It estimates rate of
change in measured GDP from one year to the next. Growth rate of GDP is the most
important indicator of assessing health of the economy (Mankiw, 2014). The figure below
shows the trend growth rate in Singapore from 2005 to 2018.
Figure 1: GDP growth rate in Singapore (2005 to 2018)
(Source: Tradingeconomics.com, 2019)
The figure above explains trend growth rate in Singapore from 2005 to 2018. As
shown from the figure, from 2005 to 2008 Singapore economy grew at a faster rate. The
economy recorded a decline in the growth rate after 2008. The economic downfall in
Singapore after 2008 was due to the Global Financial Crisis that is originated in United State.
Among the East Asian countries, Singapore was the first country that highly suffered due to
the financial crisis in Singapore. Singapore is a highly open economy relying heavily on
export. Decline in economic activity in its trading partner caused a sharp decline in export

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demand and economic slowdown in Singapore (Tan, 2016). The economy experienced a
significant decline in non-oil manufacturing export because of the deterioration of Europe
and United State. Since 2009, the economy recovered due to recovery in economic activities
and the growth rate reached to the peak in 2010. After reaching peak, economic growth
though decline however growth remains above 5 percent.
2.3 GDP per capita analysis
Per capita GDP is suitable measure for analyzing average income of a nation. It is
obtained when total GDP is divided by total population of an accounting year. It is a good
estimate for comparing living standard in two nations.
Figure 2: Per capita GDP in Australia and Singapore
(Source: worldbank.org, 2019)
As shown in the above per capita GDP in Australia was initially higher than that in
Singapore meaning a relatively higher standard of living. The gap however narrowed
overtime. Since 2016, per capita GDP of Singapore exceeds that in Australia. Use of GDP per
capita as a measure of comparing welfare may be problematic as it does not include many

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aspects of welfare. For example, it does not include leisure time enjoyed by workers in the
respective nation. Similarly, the measure says nothing about the environmental damage.
Emission of CO2 is much higher in Australia than that in Singapore (Thampapillai & Ruth,
2019). In contrast problem of air pollution is more intense in Singapore compared to
Australia.
2.4 Government measure to achieve the output performance
Government of Singapore plays an important role in boosting economic output.
Government offers stimulatory packages to ensure a stable growth of the economy. During
global economic slowdown government is ready to provide stimulatory package to support
workers and business. Singapore’s economy experienced a weak condition in 2009. In order
to stimulate economic growth, government introduced stimulatory packages of $20.5 billion
Singapore dollar (Sen, 2019). The resilience package helped the economy to escape global
financial crisis. The stimulatory package could not do much to stimulate domestic
consumption. The main focus of the package was on employment. This also minimized
business failure. During this time government withdrawn $4.8 billion to sponsor jobs credit
and finance special risk sharing initiatives.
Government of Singapore had developed Economic Strategic Committee (ESC) that
has the responsibility to design policies supportive to economic growth. The committee gives
stress on improvement of workers’ skill to enhance output performance. Government has
given its focus of developing new innovative technology that is helpful in lowering cost of
production and increase output of the nation (mof.gov.sg, 2019) A high level committee has
been set up for looking after issues related national productivity.
3.0 Labor Market Analysis

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Analysis of labor market performance needs evaluation of unemployment rate.
Unemployment in the economy occurs when worker who is actively looking for employment
but is unable to get a job. The three types of unemployment in the economy are frictional
unemployment, structural unemployment and cyclical unemployment.
3.1 Types of unemployment
Structural unemployment
Structural unemployment in defined as a type of unemployment resulted from
technical change like automation or from shift in output composition because of change in
demand of various product. This leads to an imbalance in demand for workers and the kind of
job they are searching for. The imbalances occur for various reasons such as inadequacy of
skills, changes in personal characteristics or location. Introduction of automated technology is
one factor causing structural unemployment.
Cyclical unemployment
Cyclical unemployment in the nation occur because of lack of labor demand during
recessionary phase of business cycle. In time of recession, firms face a decline in demand for
goods and services. Then they cut down scale of production and lay off workers resulting in
unemployment.
Frictional unemployment
Frictional unemployment in the economy occurs in times when people are changing
or moving occupations (Gandolfo, 2013). Change in demographic plays an important role in
frictional unemployment.
In Singapore, structural unemployment is resulted from widespread structural changes
that the economy experienced under the phase of globalization. In this context, changing

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technology from a labor intensive to a capital-intensive one causes structural unemployment
in the economy. The highly open nature of the economy makes is sensible to any kind of
external shocks (Ho, 2016). The economy suffers cyclical unemployment due to economic
shock lowering aggregate demand. As new member like students after completion of their
study join the labor force they suffer frictional unemployment for sometimes.
3.2 Unemployment trend in Singapore
Figure 2: Unemployment rate in Singapore (2005 to 2018)
(Source: Tradingeconomics.com, 2019)
The analysis of trend in Singapore’s unemployment reveals that there is a sharp
decline in recorded unemployment rate after 2005. The fall in unemployment rate during this
time was resulted from creation of new employment in the service sector
(Channelnewsasia.com., 2019). After 2008, unemployment started to increase because of
economic downturn resulted from global financial crisis. With beginning of economic
recovery labor market condition improved and unemployment began to decline. In the first
quarter of 2018, unemployment rate in Singapore fell to 2 percent. This is the lowest
unemployment in seven years. Rate of unemployment for Singapore’s residents declined

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from 3 percent for 2.8 percent. There was a decrease in holders of work permit mainly in
sectors such as shipyard and construction. The yearly unemployment rate in Singapore in the
year 2008 fell to 2.9 percent (sbr.com.sg, 2019). Employment growth for both local and
foreign workers was higher than that in the previous year. There was a significant decline in
retrenchment rate in three broad sectors such as construction, manufacturing and service.
Singapore had also made significant improvement in attaining lowest youth unemployment
rate.
3.3 Government measure to achieve full employment
Attainment of full employment is one of primary objectives of Singapore’s
government. Workforce in Singapore that was formerly called Workforce Development
Agency is a statutory board of operating under Ministry of Manpower of the government of
Singapore. The agency develops many measures to support employment generation.
Government has strengthened its support to job seekers (mom.gov.sg, 2018). In 2017, the
Adapt & Grow strategy helped many local employees to find jobs as compared to 21000 in
2016. Professional conversion program employed for professionals, managers, executives and
technicians boosted employment by three time more than that in 2016.
In order to encourage employers to hire more workers, government offers subsidies to
them comprising 20 percent of the salaries for the first six months. The subsidy amount
comprises 10 percent of the salaries for the next six months. In order to assist the workers to
move switch their jobs within and across different sectors, the government conducts a career
conversation program (Seow, 2016) Under P-Max program, government encourages more
partnership with several trade associations.
4.0 Price Level Analysis

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Analysis of price level of a nation depends on evaluation of trend in inflation rate.
Inflation rate is measure of changes in average price level measured by the change in prices
of a selected basket of goods and services.
4.1 Inflation trend in Singapore
Figure 3: Inflation rate in Singapore (2005 to 2018)
(Source: Tradingeconomics.com, 2019)
Figure 3 summarizes movement of inflation rate in Singapore for a period ranged
from 2005 to 2018. As suggested from the above trend, inflation rate increased sharply since
2005. The recorded increase inflation rate was due to the rapid expansion of economic
activities during this time. At the end of 2008, inflation rate increased above 6 percent. The
economy faced a sudden downturn after 2008 due to global financial crisis. Decline in
economic activities reduced the inflationary pressure in the economy. With recovery of
economic growth and employment, price level began to recover (Mohd, Baharumshah &
Fountas, 2013). Inflation however again started to decline sharply after 2012. In 2016,
inflation rate reached to the lowest level. The Singapore’s economy during this time was
accounted a negative inflation rate causing deflation in the economy. The recovery in the
price level thereafter was mainly due to an increase in transport and food prices. There was a

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significant increase in price of both private and public road transport price. For food prices,
there was a sharp increase in food prices including bread, sea foods, cereals, mil products,
eggs, oil and fats. Inflation rate now recovered to reach close to 2 percent.
4.2 Causes of Inflation
The two possible causes of inflation are increases in aggregate demand and a decrease
in aggregate demand. Following the cause of inflation., inflation is categorized as either
demand pull inflation or cost-push inflation.
Demand pull inflation
Inflation is termed as demand-pull inflation when there is a faster increase in
aggregate demand relative to aggregate supply.
Cost push inflation
In contrast to Demand-pull inflation, cost-push inflation occurs due to an increase in
price of factor inputs. When input price increases, firms realize an increase in production
cost. Because of increase in cost, aggregate supply falls (Foster, 2013). The shortage of goods
leads to an increase in overall price level.
Types of inflation in Singapore can be categorized as demand-pull inflation, cost-push
inflation and imported inflation. In the Singapore economy, high government expenditure in
the armed force is responsible for demand pull inflation. A high price of fuel and exchange
rate volatility leads to cost-push inflation in terms of increasing production cost (Clark,
Ghosh & Hanes, 2018). Increase in price of imported good due to currency deprecation adds
to inflationary pressure to the domestic price level and known as imported inflation.
4.3 Government measure to achieve stable price

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The Monetary Authority of Singapore intervenes to stabilize aggregate price level of
the economy. The authority takes measures related to car, property market and other needed
sector. In the vehicle market, MAS released new guidelines related to loans in 2016. As per
the new guidelines in case of cars having an open market value of $20,000 or less, buyers are
allowed to borrow at most 70 percent which was higher than the previous limit of 60 percent
(Straitstimes.com., 2016). For cars having value above $20,000 buyers can take a loan of up
to 60 percent compared to the previous limit of 50 percent.
Property market may add to an upward pressure on overall price level. Government
since 2009 therefore has taken different cooling measures to stabilize price. In 2011,
government restructured the seller stamp duty by increasing the rate to 4 years. The tax was
structured as follows – 16% for properties sold within the limit of 1year, 12 percent for 2
years, 8 percent for 3 years and 4 percent for 4 years. Loan to Value was declined to 50
percent for the purchases that were not for household or individuals. During this year
government implemented additional 10 percent duty on foreigners (Channelnewsasia.com,
2018). The cooling measures of 2012 include limiting maximum tenure of residential loan to
35 years and a higher requirement of LTV for loans exceeding 30 years. Since then
government introduced several other measures related to housing market to cool down the
market.
5.0 Conclusion
The paper briefly explains performance of Singapore’s economy in terms of analysis
of output trend, labor market performance and price level from 2005 to 2018. In measuring
output performance, the chosen indicator in Gross Domestic Product. The output growth
trend for he chosen period has shown that after a sharp decline in GDP after the global
financial crisis the economy made a quick recovery. After reaching peak in 2010, GDP

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growth began to decline. The labor market of Singapore has strengthened overtime recording
unemployment as minimal as possible. The sharply declining trend of inflation suggests that
price level remain almost stable. Active government policy measures help the economy in
achieving a stable performance in output, labor market and price level.

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6.0 References
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declines . CNA. Retrieved 25 September 2019, from
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Channelnewsasia.com (2018). New property cooling measures announced: Higher ABSD
rates, tighter loan limits. CNA. Retrieved 25 September 2019, from
https://www.channelnewsasia.com/news/singapore/singapore-property-cooling-
measures-higher-absd-rates-loan-limit-10502710
Chiu, S. W. K. (2018). City states in the global economy: Industrial restructuring in Hong
Kong and Singapore. Routledge.
Clark, A., Ghosh, A., & Hanes, S. (2018). Inflation expectations in Singapore: A behavioural
approach. Macroeconomic Review, 17(1), 89.
Foster, J. (2013). Evolutionary Macroeconomics (Routledge Revivals). Routledge.
Gandolfo, G. (2013). International Economics II: International Monetary Theory and Open-
Economy Macroeconomics. Springer Science & Business Media.
Ho, T. (2016). What Are The Different Types Of Unemployment. DollarsAndSense.sg.
Retrieved 27 September 2019, from https://dollarsandsense.sg/what-are-the-different-
types-of-unemployment/
Mankiw, N. G. (2014). Brief principles of macroeconomics. Cengage Learning.
mof.gov.sg (2019). Ministry of Finance Singapore (MOF). Mof.gov.sg. Retrieved 27
September 2019, from https://www.mof.gov.sg/resources/economic-strategies-
committee-(esc)-recommendations

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Mohd, S. H., Baharumshah, A. Z., & Fountas, S. (2013). Inflation, inflation uncertainty and
output growth: recent evidence from ASEAN-5 countries. The Singapore Economic
Review, 58(04), 1350030.
mom.gov.sg. (2018). Many measures taken to help the unemployed. Retrieved 25 September
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downturn: DPM Heng. TODAYonline. Retrieved 25 September 2019, from
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stay-pm-while-after-ge-heng
Seow, J. (2016). Parliament: New measures to help unemployed Singaporeans and
employers who take them on. The Straits Times. Retrieved 27 September 2019, from
https://www.straitstimes.com/singapore/manpower/new-measures-to-help-
unemployed-singaporeans-and-employers-who-take-them-on
Straitstimes.com (2016). MAS eases car loan rules: Higher borrowing limit, longer loan
tenure. The Straits Times. Retrieved 25 September 2019, from
https://www.straitstimes.com/singapore/transport/mas-lifts-car-loan-restrictions
Tan, A.H. (2016). Economic prospects of Singapore. In SINGAPORE 2065: Leading Insights
on Economy and Environment from 50 Singapore Icons and Beyond (pp. 213-218).

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Thampapillai, D. J., & Ruth, M. (2019). Environmental economics: Concepts, methods and
policies. Routledge.
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