Detailed Review of Singapore’s Economy
Because Singapore has a very open economy and is a highly developed international financial centre the city-state was deeply affected by the 2008 global financial crisis with growth dropping from 7.5% to 1.3%. However, the country’s economic situation quickly rebounded thanks to a rise in exports and substantial national demand. Two years later, its growth was back to 10%.
The growth estimate for 2014 is between 2.5% and 3.5% and will be Government-regulated in an effort to limit inflation. Singapore now emphasizes innovation and high value trading activities (such as R & D, biotechnology, pharmaceuticals etc). Singapore has a low unemployment rate of 2%, and the standard of living in the country is one of the highest in Asia.
Singapore’s main economic strength is its powerful industrial sector, dominated by manufacturing. In terms of economic importance, industry is followed by trade, then business services, transport, communication, and finally, financial services. The electronics and petrochemical industries are dominant, and industry overall represents 25% of GDP. The remaining three-quarters of the country’s GDP are produced by the services that employ 75% of the population. Singapore has no agricultural workforce.
The city-state is now a platform for international exchange and relies heavily on exports. This makes Singapore’s economy vulnerable to external market conditions. Free trade agreements and bilateral agreements have been signed with several countries, and Singapore currently has a surplus trade balance.
Singapore’s Economic Strengths
- According to the World Bank report, Singapore is one of the countries in the world where it is easiest to do business (it was number one in 2009).
- Highly efficient financial and communication networks, as well as an excellent public transport system.
- Singapore is located at a major maritime crossroads.
- The country is very close to other major world powers, such as China.
- Tax breaks and loan facilities exist to promote foreign investment.
Singapore’s Economic Weaknesses
- The administrative sector lacks transparency.
- The Singapore dollar is not recognized outside Singapore.
- There is no tariff protection for industrial companies.
- Public companies have a strong presence.
Singapore allows foreign investors to benefit from incentives after registering with the Economic Development Board. Certain sectors are still state-controlled (including finance, professional services and media).