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Production Output Performance Analysis

Discuss about the Singapore Macroeconomic Analysis 2005-2014.

Singapore is an island country located in Southern Asia between Malaysia and Indonesia. Its size is 697 sq km with 10 sq km being covered by water and the rest by land (Cia.gov, 2017). This economy’s population is approximately 5.8 million. The economy has strong trade links and is a major tourist destination. It has many natural and artificial features that has contributed to its improved demand for tourism activities. The improvements in the transportation sector has improved the trading networks with other major trading economies. This economy has the busiest port in the world (the Singapore port); the number of containers handled in this port are many in comparison to other major ports. This economy has been experiencing growth in the current years owing to the improved performance in the manufacturing sector attributed to increased external demand (FocusEconomics, 2017).

Singapore Real GDP

The definition of GDP provided by many scholarly articles and many economists is that it is a monetary value of everything a country produces in the given year. Its measure of economic growth is that it is an important true for deriving the real growth rate and the GDP per capita. The higher the real GDP, the higher the GDP per capita if there is no variation in the population change. It is referred to as real GDP when it is in the constant prices; meaning that it is estimated with a basis of a set year price. This ensures that a change in prices does not cause a change in GDP that cannot be compared with the other years.

 

Fig: Real GDP for Singapore

The total monetary value of all goods produced within the Singapore boundaries for the 10 years is presented in the graph above and is expressed into real terms. The trend line is derived to show the direction in which production is taking, in the graph, the real GDP can be argued to have gone up from 2005 to 2014. The increase have been recorded every year except in 2009; this is because there was a global financial crisis during this period which led to contraction of economies. Singapore was not much affected by the GFC as there was an increase in the value of production if the subsequent years.

The economy grows at different rate every year. It is nearly impossible for an economy to experience an equal growth rate for two consecutive periods. The economic situations are different every year and this explains the existing differences. Real GDP growth rate is thus a measure of the changes in the Real GDP from a period to another. It measures the economic performance in that it helps the policy makers and the interested parties to determine whether the economy is contracting or expanding. Also when the economy is expanding, it helps determine whether this is at an increasing or decreasing rate. A healthy economy should be experiencing a periodical increasing growth rate which is at an increasing rate.

Singapore Real GDP

Fig: Singapore real GDP growth rate

The real GDP growth rate for Singapore was very impressive from 2005 to 2007; an observation from the graph above can reveal an increasing growth rate during this three years. There was a sharp decline in the growth rate in 2008 and a continued fall in 2009 where the economy’s growth rate was less than zero. The negative growth rate coupled with the fact that the rate had fallen for two consecutive periods is an explanation that Singapore was in a recession in 2009. The recession did not last for long as a positive growth rate (highest level ever; more than 1.5 time the high level recorded in 2007) was recorded. This was good for this economy but was not sustained as there was a more than a half decline in 2011. The rate continues to fall and the lowest rate since the recovery was achieved in 2010 got recorded in 2014. On average, the Singaporean real GDP growth rate fell in this 10 year period as shown by the trend line.

It is the division of the Real GDP value for an economy by its population that we arrive at the real GDP per capita. It thus shows the worth of each individual in the given economy. It is used in the estimation of economic growth as an economy’s health is also determined by the living standards of its citizens. A heathy economy is expected to have a higher standards of living.

Fig: Singapore vs Seychelles Real GDP per Capita comparison

The real GDP per capita for Singapore as shown in the graph above represented by the orange clolour in the legend has exhibited a positive growth over the 10 year period. It went up before 2008 and 2009, fell during the two years, but continued rising after the recovery in 2010. In 2009 when the real GDP was falling, the lowest real GDP per capita was experienced in Singapore. However, even though there is growth in the real GDP per capita, the growth rate is too slow since the change is not big. A comparison with Seychelles economy represented by the blue colour in the legend shows that, Seychelles standards of living are better than for Singapore. The trend is also rising and also experienced the same decline in 2008 and 2009.

The success of improvement in Singapore’s real GDP is attributed to support given by the government on business entrepreneurship. Through the promotion Singapore’s industries to be highly technologically based, its industries have become more competitive and a source for cheap labour. The government has improved its transportation system so as to facilitate the movement of goods and services to the markets both internally and externally. The government has also promoted the growth and development of its service and tourism industries. Trade has a significant contribution to its real GDP and thus to promote trade, the government supports the ASEAN Free Trade Area (AFTA) and also the maintenance of membership with many regional organizations.

Singapore Real GDP Growth Rate

Unemployment Types

The global definition of unemployment is under three conditions according to Stats.mom.gov.sg (2016); one is that it includes only those who have no jobs, second these people must have been actively looking for a job, and lastly they must be willing to take any job offered to them. Unemployment have different causes which results in different categorization of unemployment types based on the causes. One of the causes is the presence of business cycles; this category is the cyclical unemployment. It is dependent on the performances by the businesses in an economy. In a period of slow economic growth such as during a recession, the unemployment rate rises; businesses contraction results in the cut on the number of workers since demand in the economy falls making the businesses to produce less. The second cause is the technological advancements; this category is the structural unemployment. It is dependent on the structural changes resulting from technological advancements. Workers who are not able to keep up with the advancing technology are laid off. New technology demands unique skills that may not be held by all the workers. Unless these workers find another job matching their current skills, the may be forced to acquire the demanded skills or to remain unfit for the available job vacancies. According to Feng (2015), structural unemployment is evident in Singapore as there exist unfilled job vacancies annually.

The third cause is the information asymmetry; this is the frictional unemployment category. It is dependent on the information on job vacancies presented to the job seekers, and the information on the suitability of a job seeker to the employers. The labor markets are not efficient in informing all the job seekers of the available jobs (Tucker, 2008). Some people lack the means of receiving such information and may take time before accessing it.

Unemployment Trend in Singapore

Fig: Unemployment in Singapore

The falling Singaporean unemployment trend observed in the graph above is an indicator that there is improvements in its labor market. The unemployment rate was highest in 2005 and fell continuously for the next two years. It rose for the next two years (2008 and 2009). The rate fell in 2010 and continued declining until 2013, but a small rise was observed in 2014.

Government Measures – Unemployment

The government has ensured the presence of various organizations that facilitate the matching of jobs at the lowest time possible for example the Community Development Council (CDC). It has also ensured a strong networking of companies in order to control frictional unemployment by improving the accessibility of information; this is facilitated by Singapore Workforce Development Agency (WDA) (Jie, 2017). He also noted that Employment & Employability Institute (E2I) and the WDA runs programs to upgrade workers skills; this controls structural unemployment. Seow (2016) also noted that the government formulated a program for career support for the workers under 40 years looking for a job.

Singapore Real GDP per Capita

Inflation Trend in Singapore

Inflation is a major concern since it is not good for an economy. It is a loss in the purchasing power for an economy’s currency owing to an increased general price level. During an inflation, the income held cannot buy the same amount of goods as it could before the inflation; it thus causes the standard of living to fall as households are force to spend more income to buy less goods.

Fig: Singapore Inflation rate

A rising trend of Singaporean inflation rate is observed in the graph above. Very low inflation rate is as bad to the economy as high inflation rate. The lowest inflation rate for Singapore was present in 2005 and rose for the next three years. The inflation rate in Singapore was very high in 2008 for the 10 year period. A low rate closer to that recorded in 2005 was recorded in 2009. The rate went up in the next two years but started falling again in 2012. Since 2011, the Singaporean inflation rate was on a falling trend till 2014. For the 10 years period, the economy experienced high inflation rate in the last 5 years.

Causes of Inflation

Inflation is caused by both the demand and supply forces. The demand forces are stimulated by the government expansionary monetary policies. For instance the increase in money supply by the government’s bank results in increased money in the circulation and thus the households’ income expands. The households demand goes up creating an excessive demand which pushes up the price level. On the other hand, the supply forces are stimulated by the increase price of output resulting from an increased price of raw materials. The higher the costs of production, the higher the price of outputs.

Government Measures – Inflation

During the periods when inflation rate in Singapore was high, the government implemented the policy of allowing its currency to appreciate so as to ensure tightening of the monetary policy (Mof.gov.sg, 2012). This was aimed to curb demand-led or imported inflation e.g. on food. Inflation is noted to result mainly on food, accommodation and transportation. The government has also introduced policies to supply build-on-order flats and other private residential houses to curb the rising housing prices (Kit, 2016).

Conclusion

Since the GFC, Singapore economy’s real growth rate has been too low; it’s only in 2010 when the growth rate was extremely impressive. It is as if the policy implemented in 2009 to stimulate growth were not sustainable for this economy from 2011 to 2014. However the policies can be argued to have worked effectively to bring massive growth in 2010. The real GDP for Singapore has been rising even though its GDP growth rate has been falling. The positive low records made is an explanation that Singapore is growing at a decreasing rate.  All the macroeconomic indicator have one thing in common; there was a poor performance in 2008-09. All the indicators are interrelated; it can be observed that similar movement were recorded in the 10 year period. Finally it can be concluded that the Singaporean economy does not have a good economic performance. Even with some indicators like unemployment rate performing well, the rate is still too high and the decline is insignificance. Therefore, a healthy economy can be argued to a country whose all the macroeconomic indicators records a positive desired movement

Cia.gov. (2017). The World Factbook — Central Intelligence Agency. Cia.gov. Retrieved 14 August 2017, from https://www.cia.gov/library/publications/the-world-factbook/geos/sn.html.

Feng, Y. (2015). Unemployment Rate in Singapore. DollarsAndSense.sg. Retrieved 15 August 2017, from https://dollarsandsense.sg/unemployment-rate-in-singapore/.

FocusEconomics. (2017). Singapore Economic Outlook. FocusEconomics. Retrieved 14 August 2017, from https://www.focus-economics.com/countries/singapore.

Heritage.org. (2017). Singapore Economy: Population, GDP, Inflation, Business, Trade, FDI, Corruption. Heritage.org. Retrieved 15 August 2017, from https://www.heritage.org/index/country/singapore.

Imf.org. (2017). Report for Selected Countries and Subjects. Imf.org. Retrieved 14 August 2017, from https://www.imf.org/external/pubs/ft/weo/2016/02/weodata/weorept.aspx?pr.x=68&pr.y=14&sy=2005&ey=2014&scsm=1&ssd=1&sort=country&ds=.&br=1&c=718%2C576&s=NGDPRPC&grp=0&a=.

Jie, W. (2017). Measure to Reduce Unemployment. Scribd. Retrieved 15 August 2017, from https://www.scribd.com/doc/56052178/Measure-to-Reduce-Unemployment.

Kit, T. (2016). Breaking Singapore's record streak of negative inflation: 5 key questions. Channel NewsAsia. Retrieved 16 August 2017, from https://www.channelnewsasia.com/news/business/breaking-singapore-s-record-streak-of-negative-inflation-5-key-q-7656780.

Mof.gov.sg. (2012). Government Measures to Contain Rising Costs and Help Lower Income Group. Mof.gov.sg. Retrieved 15 August 2017, from https://www.mof.gov.sg/news-reader/articleid/325/parentId/59/year/2012?category=Parliamentary%20Replies.

Seow, J. (2016). Parliament: New measures to help unemployed Singaporeans and employers who take them on. The Straits Times. Retrieved 15 August 2017, from https://www.straitstimes.com/singapore/manpower/new-measures-to-help-unemployed-singaporeans-and-employers-who-take-them-on.

Stats.mom.gov.sg. (2016). Unemployment. Stats.mom.gov.sg. Retrieved 15 August 2017, from https://stats.mom.gov.sg/SL/Pages/Unemployment-FAQs.aspx?Flag=2&Category=FAQ.

Tucker, B. (2008). Survey of economics. Mason, OH: South-Western Cengage Learning.

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