Singapore’s Economy Performance

Singapore’s Economic Performance
Name:
Institution:
Abstract
The paper discusses the economic performance of Singapore. It is broken into four parts that include production output performance analysis, labor market analysis, price level analysis and the summary. The paper starts by establishing that the country’s economic growth as among the best in the world by calculating Singapore’s Real GDP growth. It then discusses the conditions that make’s the country conducive for businesses and investors from all over the world. The paper also documents the low inflation and unemployment rates in Singapore. Particularly, it discusses the government’s dedication to the economy growth by the formulation of effective monetary and fiscal policies. Most importantly, it relays appropriate statistics for 2015 and the preceding year to draw a clear picture of the different areas of analysis of Singapore’s economy. Further, it discusses the causes and effects of inflation and unemployment and analyses how the government has managed to deal with the two aspects of the economy. Finally, the paper provides a succinct summary that highlights all the aspects that are discussed in the body paragraphs.
Singapore’s Economic Performance
Singapore is one of the fastest growing countries in the world. After attaining her independence in 1965, the economy has grown rapidly and now has among the highest GDP in the world. The economic growth is attributed to the extensive foreign activities especially from port activities that include oil and electronic components.

The country is also a leader in direct foreign investment and categorized as an extremely free, competitive, and business friendly for both locals and foreigners. Moreover, the country is also a financial center. However, over the last few years, the country’s economic has been slow as compared to the previous years. The paper analyses Singapore’s Economic Performance in the year 2015.
The Gross Domestic Product (GDP) is the most efficient way to evaluate Singapore’s economic growth. The country’s GDP for the fiscal year 2015 was $293 billion. From the GDP the Real GDP can be calculated to show Singapore’s economic output for 2015 after consideration of factors such an inflation and deflation (Focus Economics, 2016). Thus, Singapore’s Real GDP for the year 2015 is $311 billion. The real GDP for 2014 was $310 billion. Therefore, the country’s real GDP growth between 2014 and 2015 was 0.003%. Moreover, the country’s Real GDP per capita is $56,545. The high Real GDP per capita shows that the country’s labor productivity is amongst the highest across the globe.
The above measures are important in determining the performance of Singapore’s economic performance. The Real GDP, which is determined as a measure of a country’s economic output less the effects of inflation or deflation (Amadeo, 2016). It helps to show the real growth of the economy that could not be assessed by the study of the GDP. For instance, the GDP of a country may increase due to the rising of commodity prices. However, the Real GDP determines the actual growth that the economy has experienced. Real GDP growth, in this case, represents the true value of economic growth as calculated by deducting the previous year’s Real GDP from the current years and dividing it to that of the previous year to obtaining the percentage growth. It is important as it helps the government and other economic stakeholders to make important decisions towards fostering positive economic growth. Further Real GDP per capita represents the measurement of a country’s total economic output divided by the population and adjusted to the inflation. It is important as it ensures Singapore determine the standards of living of the population over time as well as enable comparison with other countries.
Singapore’s economic growth is among the fastest growing across the world. The country is an investment hub and most companies, and personnel seeks to invest in the country due to her business conducive environment (Heritage, 2016). Singapore’s economic growth was a stable 6.0% in the last decade prior to the Great Recession of 2008 (Kit, 2016). However, the recession drove the economy to a 0.6% lowest growth, but it later recovered in 2010 growing by an impressive 15.2%. Between 2011 and 2013, the economy growth averaged 4.1%. It shows that the economic drivers are stable to ensure a consistent growth of the economy (Focus Economic, 2016). Further, the population of the country grows predictably. For instance, between 2011 and 2014 the population grew by 100,000 people per year. Additionally, the GDP per capita of the populations does not deviate much, which shows each’s productivity remains high in the country. Finally, the unemployment figures of the low have remained at an average of 2% between 2011 and 2015. The low rates of unemployment show that the country’s population is actively engaged in the economic growth of the country.
Singapore’s government is devoted to ensuring that the economic output of the country is optimized at all times. It uses a combination of both fiscal and monetary policies to curb instances such as inflation of commodity prices as well as reduce unemployment levels. For instance, the government creates a conducive environment for all types of investors so that they can participate actively in the building of the economy. For instance, the country’s monetary policy primarily focuses on strengthening the currency exchange rate to reduce price inflations. It means that when the prices are relatively stable, the GDP increase translates to real economic growth (SGS, 2016). Moreover, Singapore does not have static long-term economic policies. Instead, the economic strategies are constantly evaluated in such a way that they respond to arising challenges and priorities. Such policies are intended at making Singapore as an excellent financial center. The rate of unemployment, which is also a major factor economic development in curbed through the demand side strategies that reduce the demand-deficient unemployment. It is also tackled through the supply side policies that reduce the structural employment in the country.
Labor Market Analysis
Unemployment rates in Singapore are significantly low as compared to that of other countries. In the past five years, the rate has been 2.0% and below. For instance, in 2011, 2012 and 2014, the unemployment rate was 2.0 while in 2013 and 2015 it stood at 1.9%. The trend of reduced unemployment means that the government is keen on ensuring that almost all of the population is earning a decent income, satisfied with their jobs and that they do not stay for long periods out of work. Further, it shows that only a few people in the country fall into the different types of unemployment. Moreover, the stable statistics show that the rate of unemployment may be categorized in the frictional and structural categories. It shows that the cyclical employment is low, as it does not deviate despite factors such as deflation and inflation.
Unemployment is the number of the people in the country that are not employed but are actively looking for work and are willing to participate in work if they are given a chance to do so. Unemployment can be classified into three distinct parts including the structural unemployment, frictional unemployment, and cyclical employment. Cyclical employment occurs due to the deviations of the economy caused by factors such as inflation and deflation. It also comes as a result of economics ups and downs such as those caused by booms and recessions. For instance, seasonal employment such as the tourism industry during summer is cyclical employment. Structural employment takes place when a worker’s skills are not in demand in the economy (Wagner, 2014). It results from an employee’s skills mismatch to that which the employee wants. For instance, the replacement of manual workers with machine operators is situational unemployment. Finally, frictional employment involves a normal economic turnover and the time it takes for a person to get employment. For instance, if one leaves a job, he or she will be frictionally unemployed until he or she finds a suitable job. The unemployment considers that even if jobs are available, people will always be employed since it takes the time to learn of the opportunities, employ for the jobs, and hiring, and training.
The economic growth of Singapore is relatively stable and, therefore, predictable in how the rate of unemployment matches up each year. Just like the economy is stable, so is the unemployment rate. The most common types of unemployment include structural and frictional unemployment. As stated above, frictional employment is the time taken by employees to find a job or between jobs. Such unemployment is common in most countries including Singapore. The structural unemployment, in this case, represents the time where the worker’s skill are inadequate for the available jobs (Pettinger, 2014). Such form of unemployment thrives until such people update their skills and knowledge to fit the market demand. In Singapore, structural unemployment is low because the country is highly industrialized and mechanized. Similarly, the people’s kills in the education systems are sharpened to fit jobs that require the use of computers and its programs as well as other machines. By the population being technologically well informed, most of the population has the skills required to perform jobs adequately. Therefore, structural unemployment is low which translates to a low percentage of unemployment in the country. However, cyclical unemployment is not prevalent in the economy. The government is intent in stabilizing the economy hence limited fluctuation of the economy.
The government of Singapore is also devoted to ensuring the full employment of its citizen. It has put in place measures that ensure that the people are well prepared for the jobs that the different jobs in the economy offer. The government has put in place monetary and fiscal policies that are conducive for foreigners by ensuring that the environment is friendly for them and by supporting business autonomy. Moreover, the country tries to stabilize the government by minimizing inflation and deflation of market prices. Additionally, the government has lowered minimum wage to reduce the unemployment caused by real, encouraged diversification of the labor market for easy hiring and firing of the employees, provided businesses with subsidies if they invest in depressed areas amongst others (Pettinger, 2014). Moreover, initiatives such as tax and interest cutting to increase aggregate demand for employees are also important in reducing unemployment in the region.
Price level Analysis
The Singapore’s economy is slowly ebbing out Inflation. The government has put inline measures that ensure that the rate of inflation is reduced so that the economy can be dependable to both the investors and the employees. Comparing the inflation rates for the between 2011 and 2015, the inflation rate was highest in former at 5.5% and lowest in 2015 at 0.6% (Focus Economics, 2016). The inflation level for both 2014 and 2015 is negative which means that the prices of commodities are reducing gradually hence making the economy more stable. From the year 2011, the inflation level has reduced tremendously to among the lowest levels across the world. The reduced inflation rate increases the motivation for investors to invest freely in the economy. It also enables the economy to grow steadily as it increases both the GDP and the Real GDP. Further, it ensures that the workforce is satisfied by their salaries, as the domestic goods are affordable to the population.
Inflation Definition And Causes
Inflation is the long-term rise in prices for commodities and services in an economy due to the devaluation of currency. Its causes include the increase of money in the economy in amounts that surpasses the economic growth. Such an increase leads to an influx of money such that businesses will charge more for goods and service. The second cause of inflation is an increase in national debt. As the national debt increase, the government only has two options that involve raising the taxes or printing more money to pay off the debt. Raising taxes leads to an increase in price levels thereby directly causing inflation while the increase of money in the country and subsequently cause inflation indirectly (S, 2015). The demand-pull effect also causes unemployment as the wages paid to the employees increases the disposal amount for spending. Consequently, liquidity increases the demand for the products, which then raises the prices of the commodities hence inflation. The cost-push effect is also a major contributor to inflation. It involves the rise in raw materials for production that forces the businesses to increase the prices of commodities and services (Harvey & Cushing, 2014). Finally, the exchange rates increase the rate of inflation. Depreciation of currency value against other countries’ currencies increases the prices of commodities for the country and makes the goods from the country cheaper for other countries with stronger currencies.
Causes of Inflation in Singapore
The main causes of inflation in Singapore include domestic cost pressures especially in housing, an increase in transport costs, and a tight labor market that has led to increasing in wages. Housing in the country especially the owner-occupied accommodation has led to an increased cost of housing hence inflation since the population has to pay more money for the basic commodity. Transport costs in Singapore have increased due to the increase of the Certificate of Entitlements (COE) thereby leading to increased transport costs over time hence inflation (GOV.SG, 2012). The tight labor market has further led to increased wages. High wages increase liquidity thereby raising demand for commodities and services and ultimately their prices. All the three factors lead to inflation in Singapore.
The government has responded appropriately to ensure that the challenges mentioned above are eliminated and that inflation is reduced appropriately. The problem of increased housing costs has been dealt through the Ministry of National Development that oversees that Built to Order (BTO) and private residential areas are constructed through subsidies to ensure that the houses are affordable. In relation to the labor market, the government works closely with Unions and labor markets to ensure that the productivity of the companies is increased. With increased productivity, best results are achieved, and the companies are able to produce highly and cover the costs of production without passing them on to the consumers. Additionally, the government educates and trains the population to improve their skills so that they are paid wages that are competent and not different. Further, the inflation on food products and other commodities is mitigated by the Monetary Authority of Singapore (MAS). MAS has facilitated the appreciation of the Singapore dollar to cover any imported inflation on food and oil. The National Environmental Agency (NEA) and Retail Price Watch Group (RPWG) has also been effective in ensuring that prices of commodities do not increase hence curbing inflation.
Conclusion
Singapore’s economy is one of the best-performing economies across the globe. The country prides in the freest, competitive, and autonomous financial center across the globe as the government makes the environment conducive for all people including foreigners to participate. The economy shows a significant growth through the GDP and the Real GDP since the country’s independence in 1965. Therefore, the Real GDP growth shows a growth of the economy. Moreover, the Real GDP per capita is high at $56, 545 showing the productivity of the population. The rate of unemployment in the county is low averaging at 2% between 2011 and 2015 and mainly comprises of frictional and structural unemployment. Cyclical employment is not common as the country is not prone to the recessions as other countries. Nevertheless, the government is at the forefront in fostering programs that equip the workers with skills to ensure their productivity, employment, and reduction of the minimum wage to avoid inflation. The government also fights inflation in other ways that include the formulation of appropriate monetary and fiscal policies. The most common forms of inflation include domestic pressures through housing and transport and high wages. However, the government through its agencies has been able to bring down the rate of inflation making it be among countries with the lowest inflation across the globe.References
Amadeo, Kimberly. “Real GDP: Definition, Formula, Compared to Nominal.” The Balance, 15 Sept. 2016, www.thebalance.com/what-is-real-gdp-how-to-calculate-it-vs-nominal-3306040.
Focus Economics. “Singapore Economy – GDP, Inflation, CPI and Interest Rate.” FocusEconomics | Economic Forecasts from the World’s Leading Economists, 15 Nov. 2016, www.focus-economics.com/countries/singapore.
GOV.SG. “How is the government helping to mitigate inflation in Singapore?” Factually, 14 Dec. 2012, www.gov.sg/factually/content/how-is-the-government-helping-to-mitigate-inflation-in-singapore.
Harvey, S. K., & Cushing, M. J. (2014). Separating Monetary and Structural Causes of Inflation. Journal of Finance & Economics, 2(3), 01-16.
Heritage. “Singapore Economy: Population, GDP, Inflation, Business, Trade, FDI, Corruption.” Conservative Policy Research and Analysis, 2016, www.heritage.org/index/country/singapore.
Kit, Tang S. “Singapore’s Economic Growth Slows Sharply to 0.6% in Q3.” Channel NewsAsia, 14 Oct. 2016, www.channelnewsasia.com/news/business/singapore-s-economic-growth-slows-sharply-to-0-6-in-q3/3203444.html.
PETTINGER, TEJVAN. “Policies for Reducing Unemployment.” Economics Help, 14 Nov. 2014, www.economicshelp.org/blog/3881/economics/policies-for-reducing-unemployment/.
SGS. “The Singapore Economy.” Singapore Government Securities, 2016, www.sgs.gov.sg/The-SGS-Market/The-Singapore-Economy.aspx.
S, Pat. “What Is Inflation Definition – Causes of Inflation Rate and Effects.” Money Crashers – Personal Finance Blog & Guide to Financial Fitness, 2016, www.moneycrashers.com/what-is-inflation-definition-causes-inflation-rate/.
Wagner, B. (2014). Types of Unemployment. Montana Department Of Labour And Industry, Research And Analysis Bureau.