Singapore has gone a long way from a colonial port of the British Empire to a country with one of the most innovative economies in the world. This small country, with a highly ethnically diverse population, several major religions and very limited resources, has taken every advantage of its geographical location at a cross-roads of major trade routes, write Analytical Center experts in their new bulletin on the current trends in the global economy titled 'Singapore: Socio-Economic Foundations of Prosperity'.
A combination of a system of national and social compromises and a strong state has allowed the country to become a major global economy and secure a high standard of living for its people (in 2017, the GDP (at purchasing power parity) per capita averaged 85.5 thousand international dollars/person).
According to the experts, key reasons for the economic growth in Singapore include the reforms implemented by the country's founder and first Prime Minister Lee Kuan Yew. These were directed primarily at investments in housing and infrastructure, human capital (better education to ensure equality of opportunities for all social groups), and at boosting productivity.
"For three and a half decades Singapore has managed to keep inflation very low and during recessions the country has even experienced deflation (-1.4% in 1986, -0.3% in 1998, -0.4% in 2002). In 2015 and 2016, despite there being no crisis, the country was experiencing deflation as oil prices fell and real estate prices declined due to a supply glut in the market and stricter administrative restrictions on sales of motor vehicles," experts write in the bulletin.
One corollary of the high degree of openness of the Singaporean economy – in 2017 the country's foreign trade exceeded its GDP by a factor of 3.7 – is a very high sensitivity of the GDP to foreign trade fluctuations, the analysts believe. Decline in exports and imports was a key cause of the decline in GDP during recession years: in 1985 exports fell by 3.3%, imports – by 4.0%, in 1998 by 4.4% and 8.6%, in 2001 by 3.5% and 6.5% and in 2009 by 7.7% and 10.6%.
The experts also note that despite a relatively high ratio of public debt to GDP (13th place in the world in 2017 at 110.9% of GDP) it comprises almost entirely the debt held by Singaporean natural persons and legal entities as government bonds and there is practically no foreign debt.
For more details see the bulletin 'Singapore: Socio-Economic Foundations of Prosperity'.
The other bulletins on current global economic trends can be found in Publications section.