Why the Singapore Economy Really Isn’t That Bad

Whenever we appraise economic growth, there is always a tendency to take a short rather than a longer-term perspective. Such a focus not only encourages us to see things in a less favourable light, but it also undervalues the importance of historical trends and any incremental growth that the global economy has experienced over the course of the last 30 years or more.

A quick glance at the global economy reveals that the levels of growth sustained since the Great Recession began in 2008 has been immensely disappointing by most metrics. Any prosperity that has been evident in either developed or emerging economies during this time has been sporadic, while uncertainty and geopolitical volatility has also caused significant fluctuating in the financial markets.

Despite this, PWT data on average, real-time inflation per capita GDP tells a slightly different narrative. This reveals that the global population was 80% richer financially in 2010 than it was in 1980, while also underlining the fact that gradual, long-term growth trends are all too easy to overlook. Interestingly, the average material well-being of society is three-times what it was in 1950, and this is an economic trend that should offer hope for future generations.

The Singapore Economy: Should We View it From an Alternative Perspective?

It should also alter our perspective on the modern day economy, particularly the ways in which we appraise specific markets, regions and asset classes in real-time. This is crucial when looking to forecast future growth trends and pre-empt the impact of specific market developments, as it encourages us to operate with a keen sense of determinism and recognise the robust nature of the global economy. It also reaffirms the cyclical nature of boom and bust and the fact that even a weak macro-economy can offer unique advantages to businesses, consumers and investors alike.

No single economy embodies this better than Singapore, which is often perceived as being one-dimensional and underwhelming given its huge natural advantages. This negative perception has hardly been helped by sluggish growth since the recession, while a recent decline in the value of the Singapore dollar (which fell to a 10-month low of 1:4362 against the U.S. alternative last week) has also created negative sentiment.

This decline was triggered by lower projections for the city’s trade-reliant growth and exports, along with the surprisingly strong performance of the U.S. dollar (chart credit: Oanda)

Of course, the idea of a weak currency is not automatically considered to be a negative for currency traders, as investors can monitor real-time trends and speculate against a specific pair. Similarly, the aforementioned cyclical nature of economic growth means that a weakened currency can drive subsequent expansion, reversing many of the trends that caused it to decline in the first instance. Most importantly, a weak dollar can trigger a higher demand for Singapore’s exports, boosting manufacturing, creating jobs and reigniting the main engine of the city’s economy.

This instantly casts the Singapore economy in a more positive light, while showcasing the potential of its currency and exports to generate income (regardless of the prevailing, real-time trends and climate). Unfortunately, this has been largely overlooked, thanks to the stereotypical perception of the Singapore economy and more pressing global issues. These include the U.S. Election, incredibly strong American data-sets and the increased competitiveness of British exports in the wake of Brexit.

The Importance of Perspective and Future for the Singapore Economy

This negative sentiment and lack of inward perspective was recently cited by NTUC Secretary-General Mr Chan Chun Sing, as he aimed to reinforce the areas of strength that exist within Singapore’s economy. His aim was to encourage Singapore and its financial leaders to focus on the fundamental aspects of internal governance and economic management, while eschewing short-terms statistics and the fluctuations that reflect cyclical growth and decline.

He also cited the growth of the city’s new Build-To-Order (BTO) initiative, which has launched numerous flats and real estate investment opportunities in a bid to diversify the region’s economic portfolio.

This offers an interesting insight into Singapore’s economic future, particularly with a total of 5,110 flats commissioned under November’s BTO scheme. This has brought the total number of launches to 10,118 to date, with these units scattered strategically across 25 individuals towns and estates within the region. Such initiatives will undoubtedly become a key driver of Singapore’s future growth, while easing the overwhelming burden that exists on the region’s exports and financial services sector.

Singapore’s established (if often underestimated) reputation as one of the world’s leading financial centres is also an important consideration, particularly with the landscape in this market changing in line with the Brexit vote. After all, while Singapore is currently the fourth largest financial hub and service provider in the world, it is not far behind London and the UK’s capital may lose some of its influence once it actually leaves the EU.

This would create yet another opportunity for the Singapore economy to capitalise and grow, and take yet another step towards altering its perception and fulfilling the immense potential that exists within its boundaries.