This paper is to assess a country's current macroeconomic position and discuss what policy options have been adopted by the monetary and fiscal authorities in the past years in order to correct any inflation, unemployment or growth problems that exist. In this paper, Singapore's economy will be discussed.
Like most other countries, Singapore wants growing living standards, high employment and low unemployment, as well as avoidance of recessions and inflation. These things are known as the targets of policy. Instruments are the policies used to achieve the targets. Two main instruments that are used in the economy are fiscal and monetary policies. The macroeconomic policy problem is to choose appropriate values of the policy instruments in order to achieve the best possible combination of the outcomes of the targets. This is continually changing problem because targets are perpetually being affected by shocks from various parts of the world economy.
Singapore is an important hub for the South East Asian region. It has a highly developed and successful free market economy, and strong service and manufacturing sectors. Singapore's economy always depended on international trade and on the sale of services. Its major industries include petroleum refining, electronics, oil drilling equipment, rubber products, processed food and beverages, ship repair, entrepot trade, financial services and biotechnology. It is moving to reduce its reliance on the manufacture and export of electrical products by developing its chemical and petrochemical industries.
Singapore's small population and dependence on external markets and suppliers has pushed Singapore toward economic openness, free trade, and free markets. This and the Government's dominant role in planning and regulating economic development have been the key factors in Singapore's consistently strong economic performance. Singapore is an economy characterized by a seemingly paradoxical adherence to free trade and free markets in combination with a dominant government role in macroeconomic management and government control of major factors of production such as land, labour, and capital.
Recent GDP History
Singapore is blessed with a highly developed and successful free-market economy, a remarkably open and corruption-free business environment, stable prices, and the fifth highest per capita GDP in the world. Exports, particularly in electronics and chemicals, and services are the main drivers of the economy. Mainly because of robust exports, especially electronic goods, the economy grew 10.1% in 2000. However, following the worst economic downturn in Singapore's history in 2001, 2002 saw a modest GDP expansion of 2.2%. This was one of the lowest growth outcomes in the Asia region in 2002.
GDP per capita (US$)211902090122768205442088721184
Real GDP growth (% change YOY)-0.96.49.4-184.108.40.206
(Monetary Authority of Singapore 's Annual Report 2002/2003)
(MAS' Annual Report 2002/2003)
Growth for 2003 are no better, Singapore's GDP contracted by a record 11 per cent annualized in the June quarter 2003 (compared to growth of 1.4 per cent annualized in the March quarter). The weak performance stems from both internal and external factors. Internally, the delicate improvement in the services sector in the fourth quarter of 2002 dissipated in the first half of 2003. Uncertainties associated with the war in Iraq and the SARS outbreak hit the hospitality, retail sales and travel-dependent services sectors hard. External demand remains sluggish. Manufacturing output, which has largely propelled growth in recent years, has not provided a major boost in 2003, with cumulative output for the January-May 2003 period rising just 0.4 per cent year-on-year; a 6.0 per cent year-on-year rise in manufacturing output in the first quarter was followed by a 7.5 per cent year-on-year drop in output in...
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