Macroeconomics of Singapore
Five decades ago, after independence, Singapore faced severe unemployment, poor infrastructure, and a housing shortage but rapidly developed from a low-income country to a high-income country. Today the city-state is ranked as one of the most prosperous cities with high-income economy having a gross national income of US$54,530 per capita, as of 2017 and the most business-friendly regulatory environment for local entrepreneurs. Singapore has the highest levels of human capital development in the world which translates that a child born today will be 88% as productive when she grows up and has enjoyed complete education and health. GDP growth in the country has been amongst the world’s highest, at an average of 7.7% since independence and surpassing 9.2% in the first 25 years. After rapid industrialization in the 1960s projected development trajectory, manufacturing steered growth. In the early 1970s, Singapore achieved full employment as Asia’s newly industrializing economies. The manufacturing and services sectors continue as twin pillars of Singapore’s high value-added economy. The overall growth of the Singapore economy was 3.2% in 2018. Value-added manufacturing in the electronics and precision engineering sectors, services sector, particularly the information and communications industries, which grew 6.0% year-on-year, and the finance & insurance industries, which grew 5.9% year-on-year. In 2017, Government of Singapore launched the regional finance hub ‘Asia’s Infrastructure Exchange’: “the go-to place where infrastructure demand and supply can connect, where one integrates infrastructure players along the whole value chain — multilateral banks, private financiers, lawyers, accountants, engineers, and other professional services.
From 1963 to 1975, Singapore invested 14 loans taken from World Bank in the infrastructure sector including water interconnection, port expansion, sewage, power and telecommunications, and shaped its development. By 1970, Govt focussed on investments in human capital and in the services sector-finance domain, created environmental management programs, and national university along with infrastructure projects. For 2019 as a whole, CPI-All Items inflation came in at 0.6 percent, up from the 0.4 percent recorded in 2018.
The economy in the 1980s rested on five major sectors: trade; export-oriented manufacturing; petroleum refining and shipping; production of goods and services for the domestic economy; and the provision of specialized services for the international market, such as banking and finance, telecommunications, and tourism.
The dependence on external markets and suppliers pushed Singapore toward free trade and markets. Singapore was a free port with a few revenue tariffs and had no foreign exchange controls or domestic price controls. FDI was allowed 70 percent of the investment in manufacturing. The government provided a high-quality infrastructure, efficient, and graft-free administration. The high domestic savings contribution of up to 25 percent of salaries to government-controlled pension fund provided reserves to face economic recessions.
References- WorldBank, singstat.gov, ILO, mas.gov.sg
