Economy
Singapore has a highly developed and successful free-market economy and enjoys an open and corruption free environment with stable prices, low unemployment, and a per capita GDP (65,233 US$ per capita) higher that of most developed countries have achieved. The economy of Singapore in 2019 had a GDP of US$372.063 Billion at current prices and US$335.539 Billion at constant 2010 prices, depends heavily on exports particularly of electronics petroleum products, chemicals, medical and optical devices pharmaceuticals, as well as transportation, business and financial services.
The country provides one of the world’s most business-friendly regulatory environment for local entrepreneurs since it is ranked among the world’s most competitive economies. Decades after the independence of the country Singapore rapidly developed from a low-income country to a high-income country which GDP grew by an average of 7.7% and topping 9.2% in the first 25 years. Singapore achieved rapid industrialization in the 1960’s which catapulted the island nation’s development trajectory and eventually manufacturing became the main driver of growth.
In the early 1970’s Singapore reached full employment and became in 1980’s one of the newly industrializing economies of Asia. Since then, manufacturing particularly in the electronics and precision engineering, services sector particularly the information and communication industries, and the finance & insurance industries remain the pillars of Singapore’s high value-added economy.
The two oil crises of the 1970’s (1973 and 1979) forced the Government of Singapore to create a new forum of economic change highlighting a focus in technology and education to be the new wave of economic gain. Furthermore, the then Governments managed to minimize inflation and provide workers with the proper machinery to sustain growth. In addition to that Singapore established the Economic Development Board to spearhead an investment drive attracting mostly foreign investment.
In the 1990’s the emergence of the new efficient manufacturing firms in southeast Asia challenged the economy of Singapore and the then Governments decided to maintain the existing 25% share of the economy while focused on developing the sectors of trade, global financing and establishing an industrial hub for international trade.
Between 1960 and 1999 the economic policy of Singapore produced real growth averaging 8%. Since its independence Singapore’s GDP has amassed an average of a 9.5% increase. Although Singapore has an open economy public sector is used both as an investor and as a catalyst for economic development and innovation. Singapore has two sovereign wealth funds, Temasek Holding and GIC Private Ltd. And they are used to manage the country’s reserves.
When the two sovereign funds were established their role was orientated more towards managing industries for economic development. In recent decades the objectives of the two funds have shifted to a commercial basis. Furthermore the Government Linked Corporations play an important role in the economy of the country.
As it has been mentioned earlier, since its independence the GDP of Singapore experienced impressive real annual average growth about 8%, between 1960 and 2000. More specifically, the economy of Singapore experiences a constant significant increase of its GDP between 1964 and 1997. This was the last year that Singapore recorded something like this, since in 1998 Singapore had a reduction of its GDP by -2.195% something that happened again three years later in 2001 when the GDP was reduced by -1.069%. The following years, the economy of Singapore experienced significant development. This happened in 1999, 2000, 2002-2007 and in 2010-2018, while in 2008, 2009 and 2019 the economy of the country marked marginal development.
Between 2012 and 2019 the growth of the economy was slower than during the previous decade. More specifically according to the World Bank between 2002 and 2011 the average growth of the GDP was 6.65%, while between 2012-2019 the average growth of the GDP was 3.06% This was the result of slowing structural growth and soft global demand of exports.
Despite these fluctuations, the GDP of Singapore according to the World Bank reached in 2019 US$372.063 Billion in current prices (US$335.539 Billion in 2010 constant prices), marginally increased by 0.733% compare to 2018 when the GDP was US$373.217 Billion in current prices (US$333.096 Billion in 2010 constant prices).
According to the Statistics Authority of Singapore the composition of the GDP of the country in 2019 was as follows:
- Manufacturing: 20.9%
- Wholesale and Retail Trade: 17.3%
- Business Services: 14.8%
- Finance and Insurance: 13.9%
- Other Services Industries: 11.3%
- Transportation and Storage: 6.7%
- Information and Communications: 4.3%
- Ownership of Dwellings: 3.8%
- Construction: 3.7%
- Accommodation and Food Services: 2.1%
- Utilities: 1.2%
At the start of 2019, the economy of Singapore was projected to grow between 1.5% to 3.5% but the output gap for FY2019 was estimated to be positive 0.2% during Budget 2019. That Budget was estimated to produce a neutral fiscal impulse. Because of the trade conflicts between U.S and China and the weakening of the external demand in global electronics the economy of Singapore grew slower than expected by 0.7% in 2019. This resulted in a revised output gap of -0.8% in FY 2019. Due to the COVID-19 Pandemic the growth in 2020 was projected to be -0.5% to 1.5%. The output gap is expected to turn more negative from 2019.
According to the World Bank, the Trade Balance of Singapore was positive in 2019 with a surplus of US$31,49 Billion. The value of the imported goods in 2019 was US$359,266 Billion and of the exported goods US$390,763 Billion. Singapore is the sixteen top importer and exporter of the world and its trade represented 319.1% of its GDP in 2019 according to the World Bank. The imports of goods during that year were US$359.266 Billion and the exports of goods US$390,763 Billion.
The import of services was US$198,819 Billion and the exports US$204,509 Billion. The main trade export partners of Singapore in 2019 were:
- China with 13.2% share,
- Hong Kong with 11.4%,
- Malaysia with 10.5% share,
- United States with 8.8%,
- Indonesia with 7% and finally
- Other countries 49%.
The main trade import partners of Singapore in 2019 were:
- China with 13.7% share,
- United States with 12.2%,
- Malaysia with 11.6%, Japan with 5.4% share, Indonesia with 4.3% and other countries with 52.7%.
According to Comtrade Singapore was a major exporter of following products in 2019:
|
US$390.3 Billion of products exported in 2019 |
|
|
Electronic integrated circuits and micro assemblies |
19.7% |
|
Petroleum oil and oil obtained from bituminous minerals |
11.8% |
|
Turbo-jets, turbo-propellers and other gas turbines |
3.7% |
|
Gold, including gas plated with platinum |
3% |
|
Electrical apparatus for line telephony or line telegraphy |
2.9% |
|
More Products |
59% |
According to Comtrade Singapore was a major importer of following products in 2019:
|
US$359 Billion of products imported in 2019 |
|
|
Electronic integrated circuits and micro assemblies |
16.9% |
|
Petroleum oil and oil obtained from bituminous minerals |
12.8% |
|
Petroleum oil and oil obtained from bituminous minerals, crude |
6.7% |
|
Turbo-jets, turbo-propellers and other gas turbines |
5.4% |
|
Electrical apparatus for line telephony or line telegraphy |
3.2% |
|
More Products |
55% |
Singapore promotes exports while has minimized barriers to imports. Singapore has signed the Asian Free Trade Area agreement (AFTA), the Trans-Pacific Partnership (TPP) and several bilateral agreements. All customs duties between Singapore and the E.U will eventually disappear once the E.U-Singapore Free Trade Agreement is ratified by both sides.
State Budget and Debt
Under its Constitution, Singapore must keep a balanced budget over each term of Government a policy that has been followed since the independence of the country with very few exceptions. According to the revised data released by the Ministry of Finance of Singapore the State Budget of 2019 had an Overall Budget Deficit of SG$1.64 Billion (or 0.3% of the GDP), since the operating revenue of this year was SG$0.17 Billion (or 0.2%) lower than the FY 2019 budget estimate and the contribution of the Net Investment Returns was SG$0.12 Billion lower than estimated.
According to the Ministry of Finance of Singapore, the revised Operating Revenue for the FY2019 was SG$74.73 Billion (estimated SG$74.9 Billion) and the revised Net Investment Returns Contribution fir the same year was SG$17.05 Billion (estimated SG$17.17 Billion).
The revised Government Expenditure for FY2019 was SG$78.163 Billion (estimated SG$80.25 Billion) was distributed to the following 4 main Sectors.
- Social Development: SG$37.1 Billion (47.5%)
- Security and External Relations: SG$21.8 Billion (27.9%)
- Economic Development: SG$16.1 Billion (20.5)
- Government Administration: SG$3.2 Billion (4.1%)
More specifically the Government of Singapore spent during FY2019 (revised data)
- Defence: SG$14.623 Billion
- Education: SG$12.83 Billion
- Health: SG$11.538 Billion
- Transport: SG$10.187 Billion
- Home Affairs: SG$6.7 Billion
- Trade and Industry: SG$4.331 Billion
- National Development: SG$3.648 Billion
- Social and Family Development: SG$2.995 Billion
- Environment and Water Resources: SG$2.627 Billion
- Culture, Community and Youth: SG$1.886 Billion
- Manpower (Financial Security): SG$1.066 Billion
- Prime Minister’s Office: SG$0.966 Billion
- Manpower (excluding Financial Security): SG$0.962 Billion
- Finance: SG$0.919 Billion
- Organs of State: SG$0.758 Billion
- Info-Communications and Media Development: SG$0.573 Billion
- Law: SG$0.551 Billion
- Communication and Information: SG$0.549 Billion
- Foreign Affairs: SG$0.45 Billion
The Covid-19 Pandemic effected the economy of Singapore like most countries around the world.
According to the data from the Ministry of Finance of Singapore for the State Budget of FY2020 the estimated Overall Budget Balance for that year is expected to be a deficit of SG$10.9 Billion (or 2.1% of the GDP) due to the consequences of the Covid-19 Pandemic. The estimated Operating Revenue for the FY2020 was SG$76.01 Billion and the estimated Net Investment Returns Contribution for the same year was SG$18.63 Billion.
The estimated Government Expenditure for FY2020 was SG$83.61 Billion was distributed as follows:
- Defence: SG15.086$ Billion
- Health: SG13.41$ Billion
- Education: SG13.28$ Billion
- Transport: SG$10.913 Billion
- Home Affairs: SG$6.984 Billion
- National Development: SG$4.458 Billion
- Trade and Industry: SG$3.813 Billion
- Social and Family Development: SG$3.25 Billion
- Environment and Water Resources: SG$2.944 Billion
- Manpower (Financial Security): SG$1.45 Billion
- Culture, Community and Youth: SG$2.279 Billion
- Finance: SG$1.099 Billion
- Prime Minister’s Office: SG$1.05 Billion
- Manpower (excluding Financial Security): SG$1.034 Billion
- Organs of State: SG$0.681 Billion
- Info-Communications and Media Development: SG$0.523 Billion
- Communication and Information: SG$0.519 Billion
- Foreign Affairs: SG$0.447 Billion
- Law: SG$0.389 Billion
Regarding Singapore’s Government debt it is issued for investment purposes and not to fund expenditure. It is also important to mention that Singapore does not have external public debt. Both Singapore’s constitution and the Government Securities Act prevent the Government from spending any funds raised through debt securities. The money cannot be used to subsidize the annual budget or running the country. Instead, it must be invested in capital projects that have sufficient profit projects to service the debt that funded them.
The Singapore Government issues the following domestic debt securities for reasons unrelated to the Government’s fiscal needs:
- Singapore Government Securities are issued to develop the domestic debt market.
- Special Singapore Government Securities are non-tradable bonds issued primarily to meet the investment needs of the Central Provident Fund (CPF), Singapore’s national pension fund; and
- Singapore Saving Bonds are introduced to provide individual investors with a long-term saving option that offers safe returns.
Singapore's gross debt was 113,6% of GDP in 2018 remained high at 114.1% of GDP in 2019 and was projected to increase slightly to 114.6% in 2020 and 115.1% in 2021. Although public debt is high financial assets held by the country can compensate it.