Describe about the Report for Macroeconomics of Singapore Government Forecasts.
Summary of the Article:
Singapore government forecasts the growth rate of economic performance of Singapore stays around 1 to 3 percent. However, there is a disagreement of economist regarding the proposed statistics of this economic performance. According to them, it is likely to be the lower than this. The growth rate of economic performance may be 1.5 to 2.5 percent. Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry publish an annual report on July 25th. Central Bank keeps a close look at the exit of Britten from the European Union, the issue of decreasing pace of Chinas economic growth and quick recovery of UK’s economy. However, according to MAS, the economy of Singapore is losing its pace of growth in the first six months, likely to increase its pace in the following half of the year. Economists take into account the issue of Brexit and China’s low-pace economic performance (Room 2016); suggest the economic growth rate is around 1.5 percent to 2.5 percent. The economist of OCBC Bank suggests almost the same figure. MAS and economist of DBS even fear of fall of the growth rate even lower by this time. According to MAS, trade cluster is likely showing some improvement. There is improvement in certain sectors or industry like electronics, sea- transport and the wholesale. Manufacturing sector shows an improvement from 0.5 percent to 0.8 percent in the second quarter than the first quarter of the year. Construction and service sectors do not show that much of improvement. However, there is a requirement of improvement in these sectors. According to Ravi Menon, the managing director of MAS, if there is no such improvement; the growth rate may be lower than the previous year. This is a real concern of the government of Singapore (Leong, Ashokkumar and Kentish 2016).
MAS recommend the policy for appreciation of zero in foreign exchange. Central Bank realizes a need of change in the existing monetary policies. MAS expectation is that gradually increasing inflation rate can cause to change in the decision of the Central Bank regarding the monetary policy. However, Central Bank clearly shows its intentions for an unchanged monetary policy. There is an interest of MAS to ensure the financial integrity of the Singapore economy. Central Bank takes some steps for the financial institution to manage the flows related to 1MDB. The statement of the Central Bank is far more comprehensible to the public than the usual one. There is a clear disappointment of MAS regarding a declining reputation of Singapore economy as a trustable center of finance. To decrease the activities of money laundering, MAS suggests active and strong regulatory framework, a corporation from the close boarder, strong supervision on a financial institution and proper enforcement of laws. Enforcement of proper rules and regulations can prevent various fraudulence and illegal activities of Singapore (Quah 2016).
Economic Definition used in this analysis:
Economic Growth: In case of Singapore, economist hopes that the growth of the economy or the economic performance of the Singapore economy is 1.5% to 2%. This figure of the rate of growth of the Singaporean economy is not convincing. To sustain its past brilliant performance of the economy, the policy makers should look forward, approve and implement the required changes to the existing policies, according to the needs of the economy (Harvie and Van 2016).
Inflation: The expectation of MAS regarding the future or the inflation rate of 2016 is in between -0.1% to 0%.
Monetary policy: The monetary authority of Singapore (MAS), manages all the monetary policies of Singapore. Central Bank of Singapore plays a crucial role in determining the various policies in the field of various monetary factors like rate of interest, rate of foreign exchange, inflation, and price stability. Volatility in the price can cause serious problem to the economy. Therefore, there should be price stability.
Money laundering: The Central Bank of Singapore sets up a new body to prevent the act of money laundering. The rising case of money laundering is the main reason of deterioration in the trust on the Singaporean economy in any related financial flows (Jansen 2016).
According to MAS, the expected growth rate of Singapore is not very impressive in 2016. The joint study of MAS and Ministry of trade and industry of Singapore publishes a report on the expected rate of growth of the economy. This report suggests that the future rate of growth of the economy stays between 1.5 to 2.5 percent. There may be several reasons behind this lower growth rate. The influential effects are the sudden exit of Britten from the European Union, the economic recovery of UK and slow growth rate of China. Adding to this context, there are some hopes arise for the performance of manufacturing, sea transport and the wholesale industry. However, the performances of the service sectors and construction sectors are not so impressive (www.mas.gov.sg. 2016). In recent day, to sustain a development of the emerging economy like Singapore, there is a requirement of sustained increase in a tertiary sector like transport and service sectors along with a healthy increase in primary and secondary sectors. However, the trends and performance of the economy of Singapore in the tertiary sector are not that remarkable. Along with this problem, the Central Bank does not make them ready to change their monetary policies. Its market policies are inconsistent with the ongoing economic situation in Singapore. Inflation rate gradually starts increasing. There are also various problems of money laundering and financial-flows related 1MDB. In the following diagram, there is a graph of the growth rate of GDP of Singapore (Room 2016).
In figure 4, the horizontal axis measures the time and vertical axis measures the growth rate of GDP of Singapore. The following graph shows the rate of GDP of Singapore from 2011 to 2016. The measurement of the rate of GDP is on a quarter scales. The blue bars are showing the division of GDP from quarter-to- quarter scale. The red line indicates the variation of the rate of GDP from year to year scale. The year-to-year scale shows a sharp decline in the rate of GDP in the period of 2011, and then it is fluctuating. It stats increasing at mid-quarter of 2013 till the last quarter. Then again, it starts decreasing and after then showing a fluctuation and remains lower till the end of first quarter of 2016 (Schmoke et al. 2016).
Quote from the given article,” the central bank also said on Monday unless there was a marked deterioration in the global economy, or a significant shift in the inflation outlook, there is no need to change its current monetary policy stance”----- this means that the central bank does not ready to change its monetary policies. The central bank changes its monetary policies if the inflation rate is significantly high or any urgent requirement arises. Figure 1, shows the demand for money and figure 2, represents the supply of money. In figure 3, first curve shows the short run equilibrium and the second graph shows the long run equilibrium of the money market. In short run aggregate supply curve is upward sloping and aggregate demand curve is downward sloping. As the demand increases relative to supply, price level rises. In long run, aggregate supply is fixed. Therefore, increase in money supply raises the aggregate demand and raises the level of price. The demand for money has a negative relation with rate of interest and fixed money supply for a given time. The equilibrium in money supply and demand decides the rate of interest. As there is no hike in inflation, there is no change in the monetary policy by the central bank.
Figure 1: demand for money
(Source: created by author)
Figure 2: supply of money
(Source: created by author)
Figure 3: demand and supply of money in SR and LR
(Source: created by author)
Figure 1:The growth rate of GDP
(Source: created by author)
From the above discussion, it is clear that Singapore economy faces a serious problem. Singapore government needs to keep a close look on the issue related to prevention of money laundering activities. The government should maintain the earned- reputation of Singapore in related financial matters and rescue back its position in the global market. The government should enhance and maintain the internal and external financial integrity. The growth of tertiary sectors is very important for any economy. Singapore shows an improved performance in the manufacturing means secondary sectors. However, there is a requirement of improvement of all the sectors in a balanced way. Therefore, there is need of a strong regulatory framework, strong supervision on the financial institution, proper enforcement laws (He 2016).
The economy of Singapore is an emerging economics. It shows a very impressive growth rate in the past. All the sectors show remarkable improvement in this regard in the past. However, due to some reasons the economy of Singapore faces some troubles in no time. There is a strong influence of certain external economic changes on the Singaporean economy. Keeping an eye on these external issues, there is a requirement of serious concern of Singapore government and Central Bank. There is a requirement of giving strong emphasis on the recommended policies of efficient policy makers and to the expert economist. Central Bank should modify its current monetary policies. Various events of money laundering and other illegal activities cause deterioration in the financial reliability of the Singapore in the global market. Therefore, to earn the reputation of the economy all over again, there is a need for coordination of all the sectors of the economy. The proposed recommendations and evaluations of 2016 annual report of MAS are very important. Therefore, there is a need for strong concern and effective implementation of various policies to recover from the present positions.
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Quah, J.S., 2016. Development: The Singapore Case. Asian Development and Public Policy, p.1.
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