The Singapore Economy

Since independence in 1965, the Singapore economy has experienced rapid economic development. Singapore's strong economic performance reflects the success of its open and outward-oriented development strategy. Over the years, the composition of Singapore's exports has evolved from labour-intensive to high value-added products, such as electronics, chemicals and biomedical. The importance of services to the Singapore economy also grew, as evidenced by the increasing share of the financial and business sectors of the economy.

As an illustration over the period from 2000 to 2010, the GDP nearly doubled, rising from S$163 billion to S$304 billion. Real GDP per capita also rose rapidly at a compounded rate of nearly 12% p.a., while inflation and unemployment rates averaged less than 2% p.a. and 3% p.a. respectively during this period.

Of equal importance to Singapore's economic achievement is a set of sound macroeconomic policies aimed at maintaining a conducive environment for long-term investment in the economy. Fiscal policy is directed primarily at promoting long-term economic growth, rather than cyclical changes or distributing income. As a result of its healthy fiscal position and consistent budget surpluses over the years, Singapore has attained a high level of foreign reserves and the strongest sovereign credit rating for long-term foreign-currency debt in Asia.

Unencumbered by fiscal concerns, the MAS is able to concentrate on its primary goal of ensuring price stability and maintaining confidence in the domestic currency. Since 1981, monetary policy in Singapore centred on the exchange rate. This reflects the fact that in the small and open Singapore economy, the exchange rate is the more effective tool in maintaining price stability.

Singapore's longer-term economic strategies and policies are constantly re-evaluated to adapt to changing challenges and priorities over time. Currently, there are focused measures in place to develop Singapore as a world-class financial centre. For example, the MAS has liberalised the domestic banking and insurance industries to greater foreign participation. At the same time, the MAS has also adopted a more open and consultative approach in its supervision and development of the financial sector, and has shifted the emphasis from regulation to risk-focused supervision. Various initiatives have also been implemented to give fund managers greater access to domestic funds, develop the debt market and overhaul corporate governance. These initiatives together with Singapore's political and macroeconomic stability, excellent telecommunications and infrastructure, strategic geographical location and a skilled and educated workforce have contributed to Singapore's rapid development into a dynamic business and financial hub in Asia.

For more information on recent developments in the Singapore economy, please refer to MAS' biannual Macroeconomic Review.