Introduction to Singapore Economy
Singapore’s economy ranks as the second freest economy in the world. Its economic freedom score stands at 89.4, which is up by 1.4 points from last year. All these figures, point towards one thing, Singapore is growing and that too at a very rapid rate. The economic freedom is a clear indication of the high levels of trade and investment freedom, labor freedom and business freedom. These three underpin Singapore economy’s competitiveness in the global market.
Singapore’s economy is also the fastest growing economies in the world. Always applauded for its minimum tolerance towards corruption, and its overwhelming success in court cases, Singapore serves as a benchmark for all those who want to achieve similar success. The progressive regime of Singapore with its pro-business stance has attracted a multitude of foreign investors and business houses. This further solidified the economic status of the country.
Factors that Contribute to the Growth of Singapore’s Economy
One of the most important parameters that has maneuvered the steering wheel of Singapore’s economic carriage towards growth is extent of business freedom here. It only takes one to two days to incorporate a business here, and no minimum capital is required. As a result, many foreign entrepreneurs get lured to make their business presence felt in this ‘Island Nation’.
Besides the ease of doing business here, Singapore’s booming economy can be attributed to its export regime. Export of particularly electronics and chemicals, is the major source of revenue for Singapore. This city-state also earns its revenue by the means of ‘entrepot’ trade. Entrepot trade implies that the goods are imported, refined, and exported for a profit margin, without having to pay the import duties. Singapore even has a separate port for ease of carrying out such activities.
In addition to this, the competitive nature of Singapore taxation system ensures that the tax rates of various forms of taxes like corporate income tax Singapore, Singapore personal income tax, property tax etc., remain low. In Singapore, the tax revenue made by the government makes up 13.8 percent of the total domestic economy, and the expenditure of the government amounts to 17 percent of the GDP.
The effects of recession that emanated in the US, also took a slight toll on Singapore. Singapore’s economy and growth got impacted due to this, although not to the extent suffered by other major economic centers of the world. Nevertheless, the economy of Singapore has recovered well over the period as compared to other nations. In fact, as per the recent report released by DBS (Development Bank of Singapore Limited), the Singapore economic or GDP growth forecasts for the years 2013 and 2014 have risen to 3.8% and 4.0% respectively.
This is a considerable upward revision from the previous estimated forecast of 2.9% and 3.5%, for 2013 and 2014 respectively. The sudden steep rise in the industrial output has uplifted the market sentiments and now it is expected that the services, manufacturing and construction sectors will also show substantial growth in the coming months.
To strengthen the economy even further, Singapore has taken measures to promote research and development activities, encourage business formation, carry out exhaustive training of the workforce, and attracting foreign investment. Hence, the bottom line is that Singapore’s economy will remain stronger even amidst global economic uncertainties, and its GDP will grow at a healthy rate in the coming period.
During the year 2015, Singapore’s GDP grew by 2.1%. Though, it was less than 2.9% in 2014; it was a significant performance in the face of global financial crisis due to the problems in the Chinese economy. According to the latest reports, during the 2016 Q1, the GDP growth rate was 1.8% year-on-year basis and the growth forecast for the year 2016 is between 1.0% – 3.0%.