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 5.4% in 2020 amidst the coronavirus pandemic but is expected to recover and grow by 6.0% in 2021 as more vaccines become available and activity picks up, before slowing down to 3.1% 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 $58,000 in 2020, but is forecast to recover to $62,000 and $64,000 in 2021 and 2022.
Singapore GDP Annual Growth Rate (in %)
Unemployment still exists but at a very low rate attributed to changes in the economy’s structure such as outsourcing low-skilled jobs. In 2019, Singapore’s unemployment rate was at 2.3%, which surged during the pandemic to 3.0%. Analysts forecast unemployment to fall to 2.7% and 2.5% in the next two years but expect recovery to be uneven.
Singapore Unemployment Rate (in %)
Currency and central bank
The Singapore dollar or SGD is the country’s official currency and is divided into 100 cents. It is often represented with the dollar sign ($) 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 12th 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%. The IMF projects an inflation rate of 1.4% for both 2021 and 2022.
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 0.7% of jobs to the workforce.
As a highly industrialized economy, the country’s industrial sector comprises 24.5% 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 70.4% 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 economy remains at the second spot, ahead of Hong Kong and just behind New Zealand. It improved its overall score from 85.8 to 86.2.
But Singapore overtook New Zealand to rank first globally in the Heritage Foundation’s 2021 Index of Economic Freedom. Singapore improved its overall score by 0.3 from 89.4 to 89.7 and is categorised “Free” along with New Zealand, Australia, Switzerland, and Ireland.
In the World Economic Forum’s 2020 Global Competitiveness Report, Singapore ranked sixth in its digital skills list and third in its digital legal framework list.
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.
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.
In August 2021, the SGX held investor calls and hired banks as part of its plan for a maiden dollar bond offering. Earlier that month, SGX Chief Financial Officer Ng Yao Loong mentioned that the exchange has been growing its fixed income, currency and index businesses as part of its move to diversify from equities.
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 2020, the private residential property index went up by 2.21% year-on-year, following rise of 2.67% in 2019 and 7.85% in 2018. Additionally, house prices increased by 2.16% compared to the previous year.
On the other hand, rents went down by 2.4% in the Core Central Region and 3% in the Outside Central Region yearly. Home purchases by foreigners also fell to a 17-year low in 2020 at only 742 units.
Meanwhile, in the first half of 2021, real estate sales in the city-state reached almost $24 bn as home prices increased by a record 4.1%. As more wealthy foreigners move to Singapore, the demand for luxury bungalows went up dramatically.
Singapore Housing Index (in %)
Source of charts: tradingeconomics.com