Singapore is considered as one of the richest countries in the world, boasting the highest GDP per capita[i] in Asia. It is renowned for its pro-business economy and is ranked as the 4th least corrupt government globally, while also maintaining one of the freest markets in the world. Notably, there is high investment from companies such as Shell, IBM, Deloitte Deutsche Bank and Accenture. However, the economy hasn't always thrived.
What makes the Singaporean economy so strong?
With the 5th highest GDP per capita in the world, at a staggering £72,794, the economy is one of the strongest in the world. It's also the strongest economy in the Eastern half of the globe. Although Singapore's economic growth has experienced fluctuations since 2018, it has consistently shown growth every quarter, peaking at 9% growth in Q3 of 2020.
The absence of excessive regulation and the presence of a free market economy makes Singapore a haven for investment, encouraging FDI[ii]. The Singaporean government has spent years working with the Economic Development Board to make sure that Singapore is an attractive place for foreign investment. Because of this, FDI inflows have increased greatly over the years, with foreign companies accounting for 75% of manufactured goods and 85% of manufactured exports. Because of this, Singapore’s savings and investment rates have increased.
Trade has become a major part of Singapore’s economic growth as well. It is effectively the only way the country can obtain many of the major resources it requires. In 2014, the country imported $419 billion and exported $519 billion, strengthening the country's balance of payments[iii]. Singapore is also a large exporter of electrical machinery and equipment, with a valuation of $120.6 billion.
Singapore identified financial services as a highly profitable sector, hence the government invested heavily in this area. The government has also managed to provide workers with the proper equipment and machinery to sustain growth in other sectors. As a result of this rise in investment, there has been a huge increase in the capital-labour ratio[iv].
When has the Singaporean economy lacked performance?
In 1950, there was a period of very high social unrest accompanied with large amounts of unemployment. Local representative boards were set up to try and improve the country, although with low trade there was a lack of both resources and money. This resulted in low growth and a stagnant period for Singapore.
In 1966, after independence from Malaysia, Singapore had a very small domestic market with a 14% rate of unemployment and large amounts of poverty. GDP per capita was $516 and half the population was illiterate. The country had become overdependent on resources being exported from Malaysia and the economy was in a desperate state.
Overall, Singapore remains a rich country with a very unique story of how it rose to riches over the years. The journey to a strong economy was not one without significant struggle.
Footnotes:
[i] GDP per capita - GDP divided by the population of a country.
[ii] Foreign Direct Investment (FDI) - investment in a business within a foreign country.
[iii] Balance of Payments - a method countries use to track money flowing into and out of a country.
[iv] Capital Labour ratio - ratio between the amount of capital and labour employed.
Bibliography:
Economy of Singapore - Wikipedia
Singapore - Trade, Manufacturing, Services | Britannica
