How to cash in on Singapore Economic Stability

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The Asian Tigers

During the last decades, Singapore has experienced a fantastic economic performance, perhaps one of the best across both advanced and emerging market economies. As one of the Asian Tigers, the country has managed not only to speed up its economic development path but also to gain macroeconomic stability.

According to World Bank (2017) data, GDP per capita (Measured in constant 2005 USD) went from 2500 in 1960 to around 38000 in 2014, which implies more than 1000% of cumulative growth in such indicator. Furthermore, GDP per capita grew at an average rate of 5.4% per year during the same period. On the other hand, overall constant GDP grew at an average pace of 7.7% during 1961-2014. The unemployment rate averaged 3.2% between 1991 and 2014, which suggests that the economy has remained very close to a full-employment stance.

Price Stability

Regarding inflation, the yearly change in the consumer price index had an average of 1.85% between 1982 and 2014 (World Bank, 2017), so it would be fair to state that price stability has been present for the last three decades in Singapore, which is not a common trend across countries, especially when compared to Latin America counterparts that experienced hyperinflation during the 1980’s and early 1990’s. Unlike the Federal Reserve, the European Central Bank, the Bank of England, and many other central banks in advanced economies, the Monetary Authority of Singapore does not use the interest rate as the main monetary policy tool; instead, the central bank centers its efforts on exchange rate interventions, as the FX rate represents an ideal intermediate target of monetary policy in the context of a small and open economy.

That said, the main macroeconomic indicators (growth, inflation, and unemployment) show a really great picture about the state of the Singaporean economy.  Singapore has retained its attractiveness for infrastructure investment.  With plenty of publicly funded infrastructure , the property asset class remains attractive to institutional and retail investor.

Advanced Economy

To the IMF (2016), Singapore is now an advanced market economy that is widely open to trade and capital flows. As a global financial hub, it has as vibrant banking sector and stock exchange. The stock market capitalization represented 242% as percentage of GDP in 2014 (World Bank, 2017). Additionally, according to Harvard CID (2014) data, its exports are -approximately- divided as follows: 36% machinery and electrical, 25% mineral products, 15% chemicals and allied industries, while the remaining portion consists of rubbers, plastics, metals, stone, glass, foodstuffs, wood and wood products, transportation, footwear, headgear, vegetable products, animal products, among others.

For 2017, the IMF (2016) expects that the Singaporean economy will grow 2.2%, a relatively good number in a global environment of slow-paced growth across advanced economies and major emerging markets. Inflation would be around 1.1%, unemployment around 2%, and the current account balance is expected to be 19% as percentage of GDP.

Cash-in on Singapore stability

Singapore is not only a good place to live in but also a great place to do property investment because the aforementioned stability in the macroeconomic sphere is accompanied by a favorable (almost corruption-free) institutional environment that generates a stable political arena and highly attractive investment climate. Once you look at the data and at how economic policy has been conducted in the country during recent decades, you understand that Singapore’s macroeconomic stability is the result of persistently effective policies, and once good institutions are built in such manner, you would normally expect similar stability in the years to come.

 

References

International Monetary Fund (2016). World Economic Outlook-October 2016.
http://www.imf.org/external/pubs/ft/weo/2016/02/

World Bank (2017). World Development Indicators database.
http://data.worldbank.org/data-catalog/world-development-indicators

Harvard Center of International Development (2014). The Atlas of Economic Complexity.
http://atlas.cid.harvard.edu/

2 Comments

  1. […] largest component of household wealth. Property market stability is therefore closely linked with macroeconomic and financial stability. So, to assess specific market developments, we use data from Bank of International Settlements […]

  2. […] is a city-state with a vibrant economy. As such, you can expect that the property market in Singapore is also booming. Often times, […]

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