GDP $USD 501.43 billions
GDP Per Capita: $USD 84,734
Currency SGD (Singapore dollar $)
Imports $USD 686.66 billions
Exports $USD 873.99 billions
Main Industries electronics, chemicals

The ‘Know Your Region’ series is designed to support unit and individual professional military education on the South East Asian region. It’s important for all serving members of our military to have a foundational knowledge of the countries and issues in the Indo-Pacific.

SINGAPORE – ECONOMY

On this page:

  • Overview
  • Economy and GDP
  • Trade Policies
  • Infrastructure

 

Overview

At the time of publication, based on 2017 figures from the World Bank, Singapore was described as a high-income economy with a gross national income of US$54,530 per capita. But according to a 2023 World Bank update, Singapore's gross national income has increased to US $70,810 per capita. The country provides one of the world’s most business-friendly regulatory environments for local entrepreneurs and is ranked among the world’s most competitive economies. The city-state's economy always has differed from those of other Southeast Asian countries in that it never has been primarily dependent on the production and export of commodities.

Upon independence from Malaysia in 1965, Singapore faced a small domestic market, and high levels of unemployment and poverty. Around 70% of Singapore's households lived in badly overcrowded conditions, and a third of its people squatted in slums on the city fringes. Unemployment averaged 14%, gross domestic product (GDP) per capita was US$516, and half of the population was illiterate. Facing severe unemployment and a housing crisis partially caused by the Bukit Ho Swee fire, Singapore embarked on a modernisation programme beginning in the late 1960s through the 1970s that focused on establishing a manufacturing industry, developing large public housing estates, and investing heavily in public education and infrastructure. Additionally, the Singaporean dollar (SGD) was established in 1967. In the early 1970s, Singapore reached full employment and joined the ranks of Hong Kong, Republic of Korea, and Taiwan a decade later as Asia’s newly industrialising economies. The manufacturing and services sectors remain the twin pillars of Singapore’s high-value added economy.

Thus, in the decades after independence, Singapore rapidly developed from a low-income country to a high-income country. GDP growth in the city-state has been amongst the world’s highest, at an average of 7.7% since independence and topping 9.2% in the first 25 years. Watch the next video for a comprehensive look how Singapore became an economic powerhouse.

The overall real GDP growth rate of the Singapore economy was 3.5% in 2018. Value-added manufacturing, particularly in the electronics and precision engineering sectors, remain key drivers of growth; as are the services sector, particularly the information and communications industries, which have grown 6.0% year-on-year; and the finance & insurance industries, which grew 5.9% year-on-year. However, real GDP growth was minimal at 0.73% in 2019. In more recent years, Singapore's economy experienced a slowdown, with growth moderating to 3.8% in 2022 and further decelerating to 1.1% in 2023. Economic growth is expected to be modest in 2024, with the government forecasting a range of 1.0% to 3.0%.

Economic development has been closely supervised by the Singaporean Government, and it has been highly dependent on investment capital from foreign multinational corporations. The Government holds about three-fourths of all land and is the chief supplier of surplus capital, which is derived largely from contributions to the Central Provident Fund (CPF) social-security savings program. In addition, the government has attempted to enhance the value and productivity of labour in order to attract investment and boost export competitiveness. This has been accompanied by a strong commitment to education and health. Labour shortages and rising wages have heightened the push for restructuring the economy even more toward higher value-added production.

The rationale for extensive government intervention in economic development has weakened. Official policy relies on market forces, privatisation of government enterprise, and more support for domestic private businesses. Union membership has declined as centralised union structures have been replaced by smaller industry- and enterprise-based unions. Greater reliance has been placed on local labour-management negotiations.

In 2017, Singapore launched the regional finance hub ‘Asia’s Infrastructure Exchange’ to position itself as the go-to place for infrastructure expertise on demand, supply, and financing.

There is huge infrastructure demand in Asia. From now until 2030, Asia is expected to require US$20 trillion of additional infrastructure investments. In its announcement, the Singapore Government highlighted the country’s strong ecosystem, one that integrates infrastructure players along the whole value chain – multilateral banks, private financiers, lawyers, accountants, engineers and other professional services.

In the most recent World Bank Human Capital Index, Singapore ranks as the best country in the world in human capital development. Together with strong financial support from the government, the country continues to strengthen the nimbleness and flexibility of its workforce by providing continuing education such as the SkillsFuture initiative. Government spending on has reached S$0.9 billion annually. In Singapore's 2024 Budget, all Singaporeans aged 40 and above will receive a S$4000 SkillsFuture credit top-up, which they can use to help pay for selected training programs, including part-time and full-time diplomas, post-diplomas, and undergraduate programs. This initiative further demonstrates Sinapore's commitment to investing in its human capital.

Additionally, Singapore has consistently been recognised for its low levels of corruption. The 2023 Transparancy International on the Corruption Perception Index (TI-CPI), ranked Singapore as the 5th least corrupt country in the world, out of 180 countries, with a score of 83 (on a scale from 0 to 100). Singapore has maintained the same rank and score from the 2022 TI-CPI and remained the only Asian country ranked in the top 10. This ranking reinforces the perception that the country’s public sector is very clean and free from corruption. One of Singapore’s unique successes is solving its housing crisis while developing, watch the video by PolyMatter to learn how.

 

Economy and GDP

Singapore has a highly developed and successful free-market economy. It enjoys an open and corruption-free environment, stable prices, and a per capita GDP higher than that of most developed countries. Unemployment is very low. The economy depends heavily on exports, particularly of electronics, petroleum products, chemicals, medical and optical devices, and pharmaceuticals, as well as on Singapore’s vibrant transportation, business and financial services sectors.

The global economic slowdown in the early 2000s combined with a lockdown to contain the SARS (Severe Acute Respiratory Syndrome) outbreak in 2003 limited Singapore’s growth. There was a major turnaround in 2004 that allowed the city-state to make a recovery of 8.3% growth. This trend was briefly interrupted by the global financial crisis which contracted the Singaporean economy by 0.6% in 2009 but returned in 2010. Growth from 2012-2017 was slower than during the previous decade, a result of slowing structural increases – as Singapore reached high-income levels – and soft global demand for exports. Growth recovered to 3.6% in 2017 with a strengthening global economy.

Singapore has few natural resources. There are no natural forests remaining on the island. Only a tiny fraction of the land area is classified as agricultural and contributes a negligible amount to the overall economy. Cultivation is intensive, with vegetables and fruits grown, and poultry raised for local consumption. The local fishing industry supplies only a portion of the total fresh fish requirement; most of the catch comes from offshore fishing vessels. There also is a small aquaculture industry that raises groupers, sea bass, and prawns. Singapore is a major exporter of both orchids and aquarium fish.

The main industries in Singapore are electronics, chemicals, financial services, oil drilling equipment, petroleum refining, biomedical products, scientific instruments, telecommunication equipment, processed food and beverages, ship repair, offshore platform construction, and entrepot trade[1]. Singapore has been able to emphasise its comparative advantage in knowledge-intensive activities – especially communications and information and financial services – which are less dependent on foreign investment. Higher productivity, and research and development are encouraged through schemes that provide investment credits and allowances. An effective economic strategy has been to invest local funds abroad and simultaneously to export management skills.

Tourism has become increasingly important to Singapore’s economy. Singapore’s central location in Southeast Asia and its excellent air-transport facilities have been augmented by massive investments in hotels and shopping centres. Duty-free shopping and a variety of recreational attractions, along with a refurbished beachfront, are among the primary attractions.

The Government continues its efforts to restructure Singapore’s economy to reduce its dependence on foreign labour, raise productivity growth, and increase wages amid slowing labour force growth and an aging population. To support this, the Progressive Wage Credit Scheme (PWCS) was introduced in Budget 2022, providing transitional wage support for employers to adjust to mandatory wage increases for lower-wage workers and voluntarily raise their wages. The PWCS was further enhanced in Budget 2024, with increased co-funding support, an expanded wage ceiling, and a targeted wage cut-off to ensure it remains focused on supporting the wage growth of lower-wage employees.

Singapore has successfully attracted major investments in advanced manufacturing, pharmaceuticals and medical technology production. The country continues to strengthen its position as Southeast Asia's leading financial and technology hub, with the Monetary Authority of Sinagpore (MAS) actively promoting the development of the fintech sector through initiatives such as the FinTech Regulatory Sandbox and the Green Finance Action Plan. Singapore remains a signatory of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and has ratified the Regional Comprehensive Economic Partnership (RCEP), which came into force in January 2022. The RCEP comprised 15 member countries, including Singapore and nine other ASEAN members plus Australia, China, India, Japan, South Korea, and New Zealand, has created the world's largest free trade agreement, opening up new opportunities for Singapore businesses to access a larger market and strengthening the country's position as a key training hub in the region.

As a founding member of the ASEAN Economic Community (AEC), established in 2015, Singapore continues to work closely with other ASEAN countries to promote regional economic integration and growth, focusing on areas such as trade facilitation, services liberalisation, and the development of regional infrastructure to enhance connectivity.

The Singapore economy was not spared the damage caused by the pandemic, contracting by 5.4% in 2020, its worst full-year recession since independence. Economic performance turned out to be much worse than the 2020 GDP growth forecast of 0.5 to 2.5% announced by the Government in November 2019, before the pandemic struck. The sharp downturn came about as the economy had to grapple with both demand and supply side shocks arising from the pandemic. This included a fall in external demand for goods and services produced in Singapore caused by the economic slowdown in major economies and global travel restrictions and supply chain disruptions, as well as the implementation of the Circuit Breaker measures domestically from 7 April to 1 June 2020. The effects of these shocks were the most pronounced in the first half of 2020, but there were signs of recovery in the Singapore economy in the second half of 2020 as the economy gradually re-opened and major economies emerged from their initial lockdowns. At that time GDP was predicted to not likely return to pre-pandemic levels until late 2021 at the earliest.

However, Singapore's economy rebounded strongly in 2021, growing by 7.6%, surpassing pre-pandemic levels. The recovery was driven by robust global demand for electronics and semiconductor-related products, as well as a gradual resumption of domestic economic activities.

Similarly, the slower recovery in visitor arrivals and capacity constraints due to safe distancing measures are likely to continue to weigh on the performance of the consumer-facing sectors, thus hindering their return to pre-pandemic levels throughout 2021. The recovery of the construction sector and marine and offshore engineering segments will likewise be slow because of the continued need for safe management measures at worksites and shipyards, as well as sluggish demand arising from the plunge in construction contracts awarded in 2020 and weakness in the global oil and gas market respectively. By contrast, the outward-oriented sectors – which had either already surpassed or recovered close to pre-pandemic levels – are expected to continue to benefit from the pickup in global economic activity this year.

 

Trade Policies

Singapore continues to perform its traditional function as a financial intermediary, shipping raw materials such as rubber, timber and spices from the Southeast Asian region in exchange for finished goods from both within and, especially, outside the region. Total exports dropped slightly from US$665.7 billion in 2018 down to US$599.2 billion in 2020, with major partners being: China (15%), Hong Kong (13%), Malaysia (9%), the United States (8%), Indonesia (7%), and India (5%). The main export commodities were integrated circuits, refined petroleum, gold, gas turbines and packaged medicines. Imports into the city-state also saw a drop from US$557.5 billion in 2018 to US$490.7 billion in 2020 coming from key partners: China (16%), Malaysia (11%), the United States (9%), Taiwan (7%), Japan (5%) and Indonesia (5%). The top import items were integrated circuits, refined petroleum, crude petroleum, gold, and gas turbines.

The Monetary Authority of Singapore (MAS) is Singapore's central bank and so works closely with all partners to develop and promote the island as a regional and international financial centre. The MAS conducts monetary policy, centred on the exchange rate, based on sound economic analysis and careful surveillance. In a small and open economy such as Singapore, where gross exports and imports of goods and services are more than 300 percent of GDP and domestic expenditure has a high import content, the exchange rate has a much stronger influence on inflation than the interest rate. Accordingly, MAS’ monetary policy framework is centred on managing the Singapore dollar against a trade-weighted basket of currencies. This is also known as the Singapore dollar nominal effective exchange rate. The MAS has maintained its monetary policy stance in 2023 and 2024, focusing on the Singapore dollar nominal effective exchange rate to ensure price stability and support sustainable economic growth.

As major advanced economies around the world are re-opening after COVID-19 health measures, it will underpin increased activity in trade-driven Asian economies. It is expected that stable external demand will continue to provide support to the trade-related sectors. Against this backdrop, Singapore's economy grew by 4.2% om 2022, with the Ministry of Trade and Industry (MTI) forecasting a GDP growth of 0.5 - 1.5% in 2023, driven by the slow but continued recovery in global trade and domestic demand.

The MTI's mission is to promote economic growth and create good jobs, to enable Singaporeans to improve their lives. This is to ensure that Singapore’s economy continues to be competitive, is able to attract investments, and nurture a deeper base of global Singapore enterprises. As a free trader with a small and open economy that is highly dependent on trade, Singapore fully supports global trade that is based on a strong rules-based multilateral trading system. This supports the free flow of goods and services with little or no barriers. In 2024, Singapore continues to champion free trade and a rules-based multilateral trading system, actively engaging in regional and global trade agreements to expand market access and opportunities for Singapore businesses.

Free Trade Agreements (FTAs) are treaties that make trade and investment between two or more economies easier. Singapore has an open economy which is driven by trade in goods and services. Over the years, it has forged an extensive network of 26 implemented agreements, such as the Sri Lanka-Singapore FTA and the ASEAN-Australia-New Zealand Free Trade area, and more are set out in the MTI's comprehensive report on Singapore's FTAs and digital economy agreements. Another example is the India-Singapore Comprehensive Economic Cooperation Agreement (CECA) signed in 2005. Trade in goods between India and Singapore doubled since CECA was signed with tariff reduction or elimination on sectors including food products, plastics, electronics, pharmaceuticals, as well as machinery and mechanical appliances. For a full breakdown, check out the following video.

Singapore also supports regional forums such as the Asia-Pacific Economic Cooperation (APEC), the Association of Southeast Asian Nations (ASEAN), and Asia-Europe Meeting (ASEM) which are complementary to multilateral forums such as the World Trade Organisation process. Singapore also took on the chairmanship of ASEAN in 2018, working with ASEAN and its external partners to forge a Resilient and Innovative ASEAN. Since then, the country has continued to actively engage with its regional partners to promote economic integration, trade facilitation, and sustainable development, adapting to the challenges and opportunities presented by the evolving global landscape in the post-pandemic era.

Trade in Singapore has benefited from the extensive network of trade agreements the Government has passed. With free trade access to the entirety of the ASEAN network, with import duty reduced when dealing with Indonesia, Malaysia, the Philippines, Thailand, Brunei, Burma, Cambodia, Laos and Vietnam. In an attempt to foster additional trade, Singapore has become a joint-venture partner in numerous projects with Malaysia and Indonesia. Investments in the nearby Indonesian island of Batam have been important in this respect. Ever closer economic ties exist with the small Nation of Brunei. The two share a pegged currency value, through a Currency Interchangeability Agreement between the two countries. The agreement makes both the Brunei and Singapore dollar banknotes and coins legal tender in either country. Watch the following video to learn more about this agreement.

For more information on the city-state's trade relationships that span the globe, access the resources below.

 

Infrastructure

As a wealthy city-state, Singapore has a highly developed Information Communications Technology (ICT) infrastructure. The Government supported near- universal home broadband penetration and free public access to the Wireless@SGx network. This encourages operators to proceed with investment programs, particularly in 5G standalone networks. In 2022, Singapore continued to expand its 5G standalone networks, with telcos rolling out new services and applications. As of 2024, Singapore has one of the most advanced 5G networks globally, supporting a wide range of industries and smart city initiatives. The Singaporean Government continues to actively promote the Smart Nation initiative to support transformation through digital innovation. The island is well served by submarine cable and satellite connections.

Singapore has the largest port in Southeast Asia and one of the busiest maritime ports in the world in terms of shipping tonnage. Despite the challenges posed by the COVID-19 pandemic, Singapore's maritime industry has demonstrated remarkable resilience and growth. In 2023, Singapore's port handled a record 39.01 million twenty-foot equivalent units (TEUs) of containerised cargo, surpassing the previous record of 37.57 milion TEUs in 2021. The port also handled 591.7 million tonnes of cargo in 2023, an increase from 578.2 million tonnes in 2022, but still lower than the pre-pandemic level of 626.5 million tonnes in 2019. The Tuas Port, a new mega-port project, commenced its first phase of operations in 2023, further enhancing Singapore's maritime capabilities and capacity. The Maritime and Port of Singapore Authority oversees all shipping activity and operates a number of terminals on the island. Containerised cargo accounts for more than half of the general cargo tonnage.

The island has a well-developed network of roads and highways, but traffic congestion is frequently a serious problem. To restrict the number of private cars on the road and curb pollution, car buyers pay for duties one-and-a-half times the vehicle's market value and must bid for a Singaporean Certificate of Entitlement, which allows the car to run on the road for a decade. In the late 1980s and early 1990s the government opened a light-rail mass-transit system that links the major population centres in the housing estates with employment centres and the central business district. Other common alternatives to private vehicles include bicycles, buses, and taxis which as a popular form of transport with relatively cheap fares. Singapore is linked by rail to Peninsular Malaysia via the connecting causeway at Johor. Singapore’s international airport, Changi, at the eastern end of the main island, is a major regional and overseas air hub. There are four registered air carriers and eight other airports with paved runways on the island. Watch the video below to learn more about Singapore’s expansion plans to boost its status as a maritime trade hub.

Water is scarce in Singapore; therefore, it is defined as a precious resource. Considered by the Government to be a national security issue, the topic of conservation is heavily emphasised. While the Singaporean Government has secured access to high quality water supply for the population, the country is projected to face significant water-stress by 2040. To circumvent this, Singapore's national water agency, the Public Utilities Board (PUB), promotes the small island country's 'Four National Taps' which work to diversify water supply into an integrated system. This includes water imported from neighbouring Malaysia, urban rainwater catchments, reclaimed water (known as NEWater), and seawater desalination. As of 2024, NEWater now meets up to 40% of the country's water demand, up from 30% in 2022. The PUB also commissioned two new desalination plants in 2023, increasing the country's desalination capacity to meet 30% of its water needs. These developments have brought Singapore closer to its goal of water self-sufficiency by 2061. Singapore's approach does not rely only on physical infrastructure; it also emphasises proper legislation and enforcement, water pricing, public education, as well as research and development. All to ensure Singapore's water independence. The Government has declared that it will be water self-sufficient by the time its 1961 long-term water supply agreement with Malaysia expires in 2061. To learn more about Singapore’s long relationship with water access, watch the following video by PUB.

For more information on Singapore’s infrastructure, see the following resources:

 

Discussion Questions:

  1. Singapore has a highly developed and successful free-market economy. It enjoys an open and corruption-free environment, stable prices, and a per capita GDP higher than that of most developed countries. What is the key to Singapore’s success and what does it mean for military activities and operations in Southeast Asia?
  2. Singapore has one of the busiest and largest operational seaports in the world. What strategic implications does this have for Australian trade and interests? What military considerations need to be taken into account with regards to this important infrastructure (from both the SAF and ADF)?
  3. Singapore is attempting to restructure its economy in order to reduce its dependence on foreign labour, raise productivity growth, and increase wages amid slowing labour force growth and an aging population. Australia is experiencing similar issues pertaining to labour shortages. Are there lessons to be learnt from Singapore’s efforts, or are the economic structures too different?

 

Last Reviewed 07/2024