Regions and Countries

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p. 6 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Hong Kong, China Republic of Korea Singapore Taipei,China Central Asian republics, Azerbaijan and Mongolia People’s Republic of China Southeast Asia South Asia The Pacific

Singapore

Economic growth: Singapore’s economy continued to grow in 2000, expanding at 9.9 percent, compared with 5.9 percent in 1999. External demand remained the key locomotive of growth, riding on strong global demand. Domestic demand was also robust. Investment in information and communication technology (ICT) strengthened in 2000, causing growth of fixed capital formation to reach 5.9 percent in 2000. Private consumption expenditure rose by 9.4 percent as consumer confidence returned as a result of improved labor market conditions, recovery in property prices, and reduction in previous high savings rates. Consumer demand weathered the negative impacts of high oil prices in the second half of 2000 and the negative wealth effect resulting from a softer stock market. The sustained growth in consumption spending tracked the upturn in the credit cycle quite closely.

Employment: Overall employment creation increased to its precrisis level, with gains occurring in both manufacturing and services. The seasonally adjusted unemployment rate continued to fall throughout 2000, finishing at 2.8 percent, from its peak of 4.3 percent. Many jobs were created as a result of the restructuring in manufacturing, particularly the disk drive subsector.

Inflation: As productivity-enhancing machinery investment peaked and wages rebounded from their depressed levels during the crisis, unit labor costs began to rise in 2000. The Government’s aggressive drive to deregulate the services sector (banking, stockbroking, power, telecommunications, and media) had a disinflationary impact in 2000. Rising oil prices were of some concern in 2000, but the relatively benign profile of trend inflation in 2000 led the Monetary Authority of Singapore (MAS) to accommodate the shock from the oil price rise through inflation. Prices of residential properties recovered, but those of nonresidential properties remained sluggish. Consumer price inflation rose to 1.3 percent in 2000, compared with a flat growth in 1999.

Fiscal balance: Public consumption in 2000 grew by 13.7 percent—a rate higher than private consumption. On a fiscal year basis (ending 31 March), the budget surplus moderated to S$3.5 billion in FY2000. Revenues increased because of the strong performance of the economy, but this was more than offset by the increase in expenditures and special transfers (such as top-ups to citizens’ Central Provident Fund accounts and contributions to the Eldercare Fund and Lifelong Learning Endowment Fund).

External sector: Exports, which suffered during the crisis, grew by 20.3 percent in 2000, compared with 4.5 percent in 1999, while imports grew by 22.2 percent in 2000, compared with 9.0 percent in 1999. As a result, the current account surplus narrowed to 23.6 percent of GDP in 2000 from 25.9 percent in 1999. Although exports are growing strongly, imports are also recovering, reflecting a combination of restocking of inventories of intermediate inputs and increasingly strong demand for consumer goods.

MAS adopted a broadly neutral stance with respect to the exchange rate in 2000, acting only occasionally to support the Singapore dollar when its value was weakened by devaluation of other Asian currencies.

Domestic policies: Efforts to improve the business environment and to divest government holdings in companies moved forward in 2000. Sales of government interests in transport companies (airline and metropolitan rail) were initiated, while preparations to reduce state interests in leading enterprises in other sectors progressed. However, government holdings in private companies are unlikely to be reduced markedly in the near term. Restrictions on foreign investments are being relaxed, most notably in communications, media, insurance, and banking, to enable foreign companies to enter these areas. The Government continues to invest selectively in priority areas such as ICT infrastructure, biotechnology, and worker training. This is meant to encourage the economy’s transition from a base for manufactured exports to a fully networked, knowledge-intensive economy and a hub for Asian finance, ICT, and transport.

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