YSS1203 Principles Of Economic

Question:

Write about Singapore’s Economic Growth.

Answer:

Introduction

Singapore’s free-market economy is well-developed and flourishing.

The country boasts a transparent and free economy that is highly anti-corruption. It also has stable prices and a higher per capita GDP.

Singapore is a free market economy that has seen significant investment in medical technology, advanced manufacturing and pharmaceuticals.

Services play an important role in the country’s development.

They make up 73.4% and 83.5% respectively of Singapore’s Gross domestic Product and employment (Central Intelligence Agency, 2017,).

The top industries in Singapore are electronics, financial and chemical services, as well as chemicals, petroleum refining and oil drilling equipment.

China, Malaysia (Hong Kong), Japan, the United States, Indonesia, South Korea, and Japan are Singapore’s top trading partners.

Singapore is an associate of the Association of Southeast Asian Nations and the Asia-Pacific Economic Cooperation.

Singapore was affected by 2008 and 2009’s global financial crisis like many other countries.

The 2009 recession saw the economy of Singapore fall to -0.60%.

Despite the country’s rapid economic growth, which registered a remarkable improvement of 15.24% in 2010, its economic growth between 2014 and 2016 was less than 3% (The World Bank 2017).

In response to this, the government has begun restructuring the economy in an effort to address low productivity.

This study explores Singapore’s economic development between 2005 and 2014.

This report examines the economic development of Singapore between 2005 and 2014. It uses indicators like real GDP, inflation, and real growth rate.

Production Output Performance Analysis: Real Domestic Product

Real Gross Domestic product is an economic indicator that measures inflation adjusted market prices for commodities produced by an economy over a specified period.

It’s a measure of economic progress that can be used to gauge the health of an economy (Blanchard & Johnson 2013).

This measure is used often by the government in the development of policies for the economy, since it is an important indicator to economic growth.

Singapore’s real GDP (Constant 2010 US$).

Graph 1 – Data extracted from The World Bank

As you can see, the real gross domestic product of Singapore has been steadily rising as shown in the chart.

This measure has been increasing slightly, but it was slightly stopped in 2008/2009.

The real GDP of Singapore increased from 2005 to 2007.

The 2008 growth was slight, but 2009 was down due to the Great Depression.

Real GDP Growth Rate

The GDP growth rate measures the annual percentage changes in an economy’s real Gross Domestic Product.

The GDP growth rate is used by economists to compare economic growth between different countries and assess the country’s economic performance.

The GDP Growth Rate can also be used to assess if a country has a boom or a recession (Blanchard & Johnson 2013).

Graph 2 Data from The World Bank

Between 2005 and 2007, Singapore’s economy grew at 7.5%.

However, due to the global financial crises, Singapore’s growth rate declined in 2008, and it fell into recession in 2009.

Despite these setbacks, Singapore recorded the highest growth rate of any country in 2010, 15.24%.

Singapore’s growth rate was above 3.5% between 2011 and 2014 (The World Bank 2017).

Real GDP Per Head

Real GDP per Capita (or real GDP per capita) is a measure that measures a country’s economic output for each person.

This measure is calculated using the real Gross domestic product and the total population.

To show a change in living standards, the GDP per person is used.

The real GDP per capita is also used by economists to show the strength and diversity of global economies (Goodwin Nelson & Harris, 2014).

Singapore’s Real GDP Per capita (Constant 2010 US$), 2005-2014

Graph 3 Data from The World Bank

The real GDP per person in Singapore has increased steadily between 2005-2014, except for 2008 and 2009.

The 2008-2009 decline in real GDP per head was caused by the global economic and financial crisis.

In this time, Singaporeans’ living standards declined.

However, Singapore’s real GDP per head has been growing yearly since this time (The World Bank 2017).

You can trace some of the strategies that the government of Singapore used to increase economic growth back to 2010.

This year, the country’s leadership established an Economic Strategies Committee to stimulate economic growth.

The committee recommended to government that they focus on productivity-driven development.

Singapore has spent more on education and training as a way to attract the best human resources.

In its efforts to reduce dependence on foreign labor force, the government’s objective to improve education and training are also linked (Hui 2013).

An important factor in economic growth is infrastructure.

A better infrastructure provides the right environment for businesses to operate.

In order to provide a favorable environment for companies, the government of Singapore continues to invest in infrastructure such as roads and rails, bridges, ports, and bridges (PANG & LIM (2015)).

Additionally, measures have been put in place to increase the ability of small- and medium-sized companies (SMEs).

For example, the government offers cash incentives for SMEs to conduct research and development projects. (TAN & BHASKARAN (2015)

These plans are essential in establishing efficient motivated growth and thus economic progress.

Unemployment and Types of Unemployment

Unemployment is when a person who is capable and willing to work fails to find work at the prevailing wage.

No matter what economic status, unemployment affects all countries in the world.

Most types of unemployment are either cyclical or frictional (Arnold 2013).

If people quit their jobs to find better ones, or if new graduates leave the workforce after they have completed their studies, then frictional unemployment occurs.

Because the unemployed do not have the right information about available job opportunities, frictional unemployment is more common.

Cyclical unemployment can be defined as an involuntary type of unemployment due to insufficient demand in an economy.

This type is often called Keynesian “demand insufficient” and happens during times of economic downturns (McTaggart. Findlay. And Parkin. 2015).

Structural unemployment, on the other hand is caused by structural change like the introduction new machines at work that results in skill mismatches leading to unemployment.

Types and levels of unemployment in Singapore

Singapore has both structural, cyclical and frictional unemployment.

First, many Singaporean graduates do not find employment right away after they complete their studies.

In Singapore, people also move between jobs to experience unemployment.

Singapore is also experiencing structural unemployment, particularly in its manufacturing sector.

Singapore has lost its competitiveness as a manufacturing country due to international competition from low-cost emerging countries.

Structural unemployment is a result of the reduction in Singapore’s exports due to India’s IT-software and China’s manufacturing.

Singapore is a small open economy, heavily dependent on trade.

This country is significantly influenced more by external than internal demand.

This is why reliance on trade can often lead to cyclical unemployment if the demand for the domestic or foreign market is weak (Thangavelu (2012)).

Trends in Singapore’s Unemployment

Graph 4 Data from The World Bank

Between 2005-2007, Singapore’s unemployment rate declined by a significant amount.

In 2005, Singapore’s unemployment rate stood at 5.59%. It was 3.9% in 2007.

Due to the global economic downturn, it rose to 3.96% in 2008 and to 4.3% in 2009.

However, since 2009, unemployment has been decreasing steadily.

Government measures to curb unemployment

The unemployment rate in Singapore has fallen significantly since 2009’s Great Depression.

In 2015 and 2016, Singapore’s unemployment rate was 1.69% compared to 1.83% in 2016.

This is a clear indication that the government has developed effective programs to reduce unemployment.

The financial assistance provided to Small and Medium-sized enterprises is a key component in reducing the unemployment rate (WILSON 2015).

This financial support has facilitated growth and expansion of SMEs, which in turn has led to the creation of jobs.

Singapore’s leadership has implemented a number of constructive policies for foreign direct investments that have contributed to reducing unemployment.

These policies play an important role in attracting foreign firms to Singapore, which provides jobs for Singaporeans.

Singapore Workforce Development Agency (WDA), which provides labor market news and job search services, has been established by the government.

Two weeks notice must be given to all companies in Singapore to inform the public about job openings. Then, they can apply for overseas staff to fill them (Thangavelu (2012)).

The Meaning of Inflation and the Typical Causes

Inflation refers the constant rise in the prices of goods or services in an economy.

Inflation may be caused by demand-pull factors or cost-push variables.

Inflation can be caused by demand-pull or cost-push factors. These are actions that increase money in the economy.

This could include an increase in wages and salaries as well increase government spending like transfer payments. It also reduces the cost of borrowing.

Cost-push variables are situations that increase production costs.

Increased costs of labor, raw material, and other important inputs like oil can all lead to cost-push inflation (Arnold 2013).

Trends in Inflation for Singapore

Graph 5 – Data extracted from The World Bank

Since 2005, Singapore’s inflation has steadily increased and reached a recommended rate in 2007 of 2%.

In 2008, however, the inflation rate in Singapore rose gradually to 6.52%. It then fell to 0.60% in 2009.

Inflation was anywhere from 1% to 5.25 percent between 2009-2014 (World Bank, 2017).

This country was in deflation from 2015 to 2016.

Inflation is a result of both cost-push and demand-pull factors in Singapore.

Inflation is caused in Singapore by the decline in the cost to borrow, the increase in credit availability, and the purchase or government bonds.

Inflation can also be caused by an increase in input costs among different sectors of Singapore.

Deflation has also affected Singapore in recent years, 2015 and 2016.

Weak demand for goods or services has caused deflation.

Government measures to control inflation

Singapore’s government uses both fiscal policy and monetary policies to control inflation.

Inflation is often high and contractionary policies can be used.

In other words, the government may raise the interest rates, sell bonds, or reduce its government.

During low inflation and deflation, government can use expansionary instruments like lowering interest rates or increasing government expenditures or buying government bonds (TAN & BHASKARAN (2015)).

Conclusion

Singapore’s free-market economy is well developed and flourishing.

Singapore has seen remarkable economic growth over the past decade, except 2009, when Singapore’s economy was deep in recession due to the Great Depression.

Between 2005-2014, the country’s highest economic growth was at 15.24%.

Singapore is also among those countries that have low levels of inflation and unemployment.

In 2014, the country had a 2.80% unemployment rate and an inflation of 1.01%.

This country’s leadership has implemented several programs to ensure economic growth and employment creation as well as price stability.

The government continues to invest in critical infrastructures like roads and rail, bridges, as well as ports to create a favorable business environment.

In addition, the government provides resources for education and training to increase the human capital.

Cash incentives are offered to SMEs in research and development as a way to support their growth and productivity.

Singapore Workforce Development Agency has been established by the government to offer labor market news and job search services through efficient industry network.

The government employs both monetary as well fiscal policies to maintain stable prices.

The government uses expansionary policies when inflation is very high and contractionary instruments when it is high.

(2017 August 1).

SINGAPORE, East & Southeast Asia.

Macroeconomics in context.

Armonk (New York): M.E.

Fifty Years of Economic Development in Singapore: An Introduction to Review.

International Labour Review, pages 107-123.

LABOR, PRODUCTIVITY, AND SINGAPORE’S DEVELOPMENT MODEL.

Singapore Economic Review, 1-30.

THE ROLE & PURPOSE OF THE STATE in SINGAPORE: PRAGMATISM FOR THE PURSUIT OFF GROWTH.

Singapore Economic Review, 1-30.

Economic Growth and Foreign Workers, ASEAN and Singapore.

Asian Economic Papers, Pages 114-136.

The World bank.

The World Bank.

GDP growth (annual%).

The World Bank.

GDP per capita (constant 2010, US$).

The World Bank.

Inflation and consumer price (annual %).

The World Bank.

Unemployment, total (% total labor force) (calculated ILO estimate).

MONETARY POLICY & FINANCIAL SELECTOR DEVELOPMENT.

Singapore Economic Review, 1-25.

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