Singapore has a well-developed free market economy with low corruption and tax rates. It has ranked among the top two nations on the Index of Economic Freedom for 25 consecutive years.
In the last 12 years, Singapore’s nominal GDP has almost doubled from $179 billion in 2007 to $346 billion in 2018. The economy grew 2.5% last year. The IMF estimates Singapore’s GDP growth rate to average 2.6% for the next five years.
Singapore’s GDP per capita in terms of Purchasing Power Parity reached $98,255 in 2018. It is the fourth-highest in the world, and the number is expected to increase to $118,201 in 2023.
Singaporean Economy: Small Population with Low Unemployment
By the end of 2018, Singapore had a population of 5.6 million. Ethnic Chinese account for over 70% of the total population, followed by Malay and Indian nationals. Over a quarter of the population are non-residents.
The total population grew slightly over 0.5% last year. With a median age of 41 years old, Singapore’s population is regarded as ageing. In 2018, 15% of the Singaporean population was age 65 years old or more. To slow the shrinking population, Singapore grants around citizenship or permanent residence to over 50,000 people each year.
As of 2018, Singapore unemployment rate was 2.2%. The number has stood at around 2% for the last decade. This trend will continue until at least 2023.
Currency and central bank
Singapore’s official currency is the Singapore dollar (S$). Under the Currency Interchangeability Agreement, the Singapore dollar is also customarily accepted in Brunei Darussalam and vice versa.
Singapore’s central bank, the Monetary Authority of Singapore, has the exclusive right to issue the currency. The central bank operates a managed float regime for the Singapore dollar but does not have control over domestic interest rates or the money supply. Instead, the interest rates are determined by foreign interest rates and market expectation.
Singapore: No specific inflation targets
Unlike some other central banks, the Monetary Authority of Singapore does not have specific inflation targets. Last year, the inflation rate of Singapore jumped to 1.4%, from 0.4% the previous year. However, inflation is relatively stable with an average rate of 1.9% for the last 30 years.
Industry and trade
The Singapore economy is mainly driven by the services and manufacturing sectors. In 2018, services contributed to about 70% of GDP, while the goods-producing industry generated around 25% of total GDP. Major industries in Singapore include computer and electronics, motor vehicles, food and beverage, refined petroleum and chemical products. Additionally, Singapore also operates the second-busiest re-exportation trade port in the world.
There are currently 263,900 companies in Singapore with around 62% of the business entities in Singapore considered to be foreign enterprises. However, state-owned holding company Temasek holds majority stakes in several of Singapore’s largest companies, including DBS Bank, Singapore Airlines, CapitaLand, SingTel and ST Engineering.
Trade and Competitiveness
In terms of foreign investment, Singapore has maintained its position at second place in the Ease of Doing Business index since the World Bank began publishing it in 2003. The latest data from the Singapore Department of Statistics shows S$1.5 trillion of FDI inflows in 2017, making Singapore the fifth-largest FDI recipient in the world. The main investment comes from the U.S. and the Cayman Islands.
Stock exchanges and capital markets
Singapore Exchange Limited (SGX) is the stock exchange of Singapore, formed in 1999 as a holding company. It was a merger between the Stock Exchange of Singapore (SES) and the Singapore International Monetary Exchange (SIMEX). On 23 November 2000, SGX became the second exchange in the Asia Pacific to be listed via a public offer and a private placement, after Australia.
By the end of December 2018, SGX had 741 listed companies with a market cap of $689 billion. The most important SGX index is the Straits Times Index (STI), a market capitalisation weighted index that tracks the performance of the top 30 companies listed on SGX.
Foreign investors can invest in all securities traded on the SGX. There are no restrictions on foreign ownership in Singapore and each company is responsible for monitoring its own foreign shareholding limit.
However, the Singapore government holds a monopoly on certain key sectors, such as financial services, professional services, media and telecommunications. Government-related companies also play a dominant role in the domestic economy in investment.