Singapore is a high-income economy, known for its excellent finances and a high degree of openness. Being one of the most competitive economies worldwide, Singapore is well known for providing one of the most business-friendly environments globally.
Since achieving independence in 1965, Singapore transformed itself from a small domestic market economy with high unemployment and poverty levels to a highly developed, free-market economy, through decades of industrialisation.
The city-state is highly urbanised, with a population of 5.7 million. English is one of Singapore’s official languages and is the most spoken language, particularly in business.
At present, GDP growth is driven mainly by exports and domestic demand. Singapore’s GDP went down by 4.1% in 2020 amidst the coronavirus pandemic. However, as more vaccines became available, and activity picked up, the economy expanded by 7.6% in 2021, the highest rate in a decade since 2010 recorded full-year expansion of 14.5%. As Singapore plans further easing restrictions, the government forecasts the economy to expand by 3-5% in 2022.
The country’s GDP per capita is among the highest in the region and globally. However, it went down from $65,000 in 2019 to $59,000 in 2020. This has increased to $66,000 in 2021 and is forecasted to reach $69,000 in 2022 and $72,000 in 2023.
Singapore GDP Annual Growth Rate (in %)
Unemployment still exists but at a very low rate attributed to changes in the economy’s structure such as outsourcing low-skilled jobs. In 2019, Singapore’s unemployment rate was at 2.3%, which surged during the pandemic to 3.0%. The rate declined to 2.6% in 2021 and is expected to fall to pre-pandemic levels this year.
Singapore Unemployment Rate (in %)
Currency and central bank
The Singapore dollar or SGD is the country’s official currency and is divided into 100 cents. It is often represented with the dollar sign ($) or S$ to distinguish itself from other dollar currencies. Banknotes and coins are issued by its central bank, the Monetary Authority of Singapore (MAS).
In terms of value, the Singapore dollar ranks 11th as the most traded currency worldwide as of 2021 and is considered one of the strongest values in the Asia-Pacific region. Aside from serving as the central bank, the MAS, currently headed by its chairman Tharman Shanmugaratnam, also functions as the country’s financial regulatory authority.
Inflation in Singapore was at 0.6% in 2019 and entered the negative territory in 2020 at -0.4%. Singapore’s core inflation in January 2022 rose to 2.4% on a year-on-year basis, the highest level in more than nine years. As per the MAS, core inflation is expected at 2-3% in 2022, while headline inflation is expected to be 2.5-3.5%.
Singapore Inflation (in %)
Industry and Trade
The main sectors of Singapore’s economy are industry, services, and agriculture. However, agriculture’s contribution to GDP is almost non-existent, and it provides only 0.3% of jobs to the workforce.
As a highly industrialized economy, the country’s industrial sector comprises 24.3% of the GDP and provides work for 15.2% of the working population in 2020. Among the country’s leading industries are electronics, petrochemicals, biomedical sciences, logistics, and transport engineering.
Meanwhile, its service sector has the most significant GDP contribution at 70.9% and employs 84.1% of Singapore’s workforce. Trade, business services, transportation, communications, and financial services are the country’s biggest service categories.
Singapore is currently ranked 18th in terms of total exports, with integrated circuits, refined petroleum, gold, gas turbines, and packaged medicaments as its main export products. Its top export partners are China, Hong Kong, Malaysia, the US, and Indonesia.
Meanwhile, the country is 16th in total imports and its top import products are integrated circuits, refined petroleum, crude petroleum, gold, and gas turbines. China, Malaysia, the US, Taiwan, and Japan are its main import partners.
Singapore Balance of Trade
Survey and Rankings
For the World Bank’s 2020 Ease of Doing Business Index, Singapore’s economy remains at the second spot, ahead of Hong Kong and just behind New Zealand.
Singapore ranked first globally in the Heritage Foundation’s Index of Economic Freedom. Singapore improved its overall score to 84.4 out of 100 in 2022 and ranked 1st among 39 countries in the Asia–Pacific region.
Singapore received 85 points out of 100 in the World Economic Forum’s Global Competitiveness Report, ranking in the top five, ahead of the United States, Hong Kong, the Netherlands, and Switzerland.
Stock Exchanges and Capital Markets
The Singapore Exchange or SGX remains the sole stock exchange in the country. It is a multi-asset exchange that operates equity, fixed income and derivatives markets, and provides listing, trading, clearing, settlement, depository, and data services. It is the largest stock market exchange in Southeast Asia. As of the end of June 2021, the entire market capitalization of listed equities had surpassed $663 bn, with a daily average trading value of $0.99 bn.
The SGX uses the FTSE Straits Times Index or STI as its benchmark index. The STI is a capitalisation-weighted stock market index that tracks the performance of the top 30 companies listed on the SGX.
Around 40% of the companies listed on the SGX are based outside the country, and it promotes itself as an offshore market for equity index derivatives, covering major Asian economies with the highest liquidity worldwide.
Along with London, New York, and Tokyo, Singapore is consistently listed as one of the world’s most active trading centres. Meanwhile, Singapore also has the third-largest foreign exchange market in the world, with daily trading volumes at $640 bn.
Singapore’s bond market continues to attract both local and foreign investors. Recognised as one of the most developed markets in Asia, the country is one of the few nations with a AAA credit rating from major rating agencies.
Singapore Government Securities (SGS) are debt securities issued by the country’s government. There are four types of SGS, namely Treasury Bills or T-bills, SGS Bonds, Singapore Savings Bonds (SSBs), and Cash Management Treasury Bills (CMTBs).
According to the MAS, SGS Bonds and T-bills are issued primarily to build market liquidity and provide a strong government yield curve, to expand an active secondary market for cash transactions and derivatives to achieve risk management efficiency, and to encourage domestic and international issuers and investors to participate in the country’s bond market.
Real Estate Market
Despite the effects of the Covid-19 pandemic, Singapore’s real estate market remained resilient in 2021.
Singapore’s commercial real estate activity increased by 177% to $9.0 bn in 2021, making it the Asia Pacific’s sixth most active market (APAC), as per the latest Asia Pacific Capital Trends report from Real Capital Analytics.
In the fourth quarter of 2021, the real estate sector grew by 1.6% year-on-year, primarily driven by the private residential property segment, which saw both sales transactions and prices rise.
This was despite the announcement of property cooling measures in December 2021 such as higher taxes on second and subsequent property purchases and tighter limits on loans, that were aimed at the private and public residential real estate market.
Singapore Housing Index (in %)
Meanwhile, residential property prices are likely to climb between 1% and 4% in 2022, according to real estate agents Knight Frank and JLL, following a 10.6% increase in private home prices in 2021.
Source of charts: tradingeconomics.com