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Recent Economic Developments in Singapore: 

Recent Economic Developments in Singapore

Outline for this Presentation: 

Outline for this Presentation Structure of the Singapore Economy Business Cycles in Singapore Dynamics of the 2001 Recession Characteristics of the Initial Upturn Support Provided by Policy

Slide3: 

Structure of the Singapore Economy

Importance of Trade to Singapore: 

Importance of Trade to Singapore

Structure of the Economy By Sector: 

Structure of the Economy By Sector Manufacturing (22%) Construction (6%) Commerce (18%) Transport & Comm. (11%) Business Services (14%) Others (17%) Key Services Sectors = 67% Financial Services (12%)

Slide6: 

Manufacturing Output Chemicals (17%) Petroleum Products (4%) Others (21%) Electronics (38%) Machinery & Equipment (6%) Transport Equipment (9%) Fabricated Metal Products (5%)

Pharmaceutical industry’s linkages with rest of the economy limited…: 

Pharmaceutical industry’s linkages with rest of the economy limited… Pharmaceutical Industry Accounts for only 8% of total manufacturing output Employment generation limited: 0.6% of total manufacturing employment

…unlike the electronics industry: 

…unlike the electronics industry Electronics Industry Accounts for 42% of total manufacturing output Generates higher employment: Electronics- 30% of total manufacturing employment Supporting- 37% of total manufacturing employment

Slide9: 

Structure of the Economy: Exports by Product Non-oil (82%) Oil (18%) Electronics (61%) Chemicals (13%) Others (16%) Misc Manufactured Articles (10%)

Slide10: 

Others 15% North America 23% EU 18% Japan 10% NIE-3 15% ASEAN-3 18% Structure of the Economy: Exports by Country

Summary I: 

Summary I Ultra Open Economy Manufacturing & Services as Twin Pillars Dominance of Electronics in Manufacturing / Exports Chemicals Rising But Less Linkages & Multiplier’s Effects

Slide12: 

Business Cycles in Singapore

Slide13: 

Singapore’s Real GDP (LHS) GDP Growth from 1980 Composite Foreign GDP (LHS) Global Chip Sales (RHS)

Slide14: 

Dynamics of the 2001 Recession

World Demand-Domestic Supply Curve: 

World Demand-Domestic Supply Curve DS1 WD1 WD2 Price Level (Domestic currency) Real GDP Q1 Q2

Slide16: 

The Singapore economy contracted by -2.0% in 2001 Overall Goods-Producing Industries Services-Producing Industries

Exports & industrial output fell sharply: 

Exports & industrial output fell sharply

Services exports were also affected: 

Spillover to Services Sectors Services exports were also affected Total ASEAN-3 NIE-3 Re-Exports Travel Transport Overall Services Exports Q1 Q1

Slide19: 

Adjustments in the Labour Market N W/P

Slide20: 

Flexible wage response Average Nominal Earnings, SA No. of quarters 85Q1=100 97Q4=100 00Q4=100

Slide21: 

Exports CPI Real GDP Unemployment Rate Summary of Key Indicators : Peak-to-Trough Adjustments Comparisons Across Downturns -7.7 (3Q) -3.1 (3Q) -5.3 (3Q) -0.9 (3Q) -1.6 (4Q) -2.0 (4Q) 2.1 (4Q) 2.7 (5Q) 3.6 (7Q) -28.4 (4Q) -7.7 (4Q) -12.9 (2Q)

Summary II: 

Summary II More volatile environment – 3 shocks in 5 years Cause shifts in AD curve Dynamics of Recession : Exports  Output  Services  Labour Market  Prices 2001: Deepest Recession 2001 : Wages adjusted quickly

Slide23: 

Characteristics of the Initial Upturn

Slide24: 

US economy Non-Residential Fixed Investment GDP Personal Consumption

Slide25: 

GDP (YOY) GDP (SAAR) Turnaround in domestic economic activity

Slide26: 

Manufacturing driving the uptick in growth Surge in manufacturing SAAR in Q4 2001 continued into Q1 2002… …along with positive NODX growth in the last two quarters... Manufacturing Value-Added Non-oil, Non-electronics NODX Electronics

Hub-related services doing well.: 

Hub-related services doing well. Air Transhipment Cargo Real Non-oil Re-exports Re-exports supported by regional trade Singapore provides hub services

Divergent Paths?: 

Divergent Paths? Total (SAAR) Electronics (SAAR) Non-electronics (SAAR) Apr-May Electronics-led initially Chemicals has less spillovers Chemicals surge more recently

Slide29: 

Support Provided by Policy

World Demand-Domestic Supply Curve: 

World Demand-Domestic Supply Curve Price Level (Domestic currency) Real GDP

Macroeconomic Policy Mix: 

Macroeconomic Policy Mix Expansionary Fiscal Policy off-budget packages multiplier effect 1.3% point boost to economy Easier Monetary Conditions

Slide32: 

Outlook for Growth Manufacturing sector expected to turn in steady growth Financial services sector to remain weak Moderate rebound for the services sector Construction sector expected to contract further GDP Growth to come in at the upper half of the 2-4% forecast range

Summary III: 

Summary III Led by initial turnaround in the US Led by electronics & trade-related services Conducive Macro-Policy Mix Risks to Growth

Slide34: 

Conventions used in data presentation