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Recent Economic Developments in Singapore. 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. Structure of the Singapore Economy.

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Presentation Transcript
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
structure of the economy by sector
Structure of the EconomyBy Sector

Business Services (14%)

Commerce (18%)

Financial Services (12%)

Others (17%)

Transport & Comm. (11%)

Manufacturing (22%)

Construction (6%)

Key Services Sectors = 67%

slide6

Manufacturing Output

Machinery & Equipment (6%)

Petroleum

Products (4%)

Transport

Equipment (9%)

Electronics (38%)

Fabricated Metal Products (5%)

Others (21%)

Chemicals (17%)

pharmaceutical industry s linkages with rest of the economy limited

Exports

(99%)

Imports

Domestic

(1%)

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

Exports

(72%)

Imports

Supporting

Industries

Domestic

(28%)

…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

Electronics (61%)

Oil (18%)

Non-oil (82%)

Others (16%)

Chemicals (13%)

Misc Manufactured Articles (10%)

slide10

Structure of the Economy:Exports by Country

Others 15%

ASEAN-3 18%

North America 23%

NIE-3 15%

EU 18%

Japan 10%

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
slide13

GDP Growth from 1980

Singapore’sReal GDP (LHS)

Composite Foreign GDP (LHS)

Global Chip Sales (RHS)

world demand domestic supply curve
World Demand-Domestic Supply Curve

DS1

Price Level (Domestic currency)

WD1

WD2

Q2

Q1

Real GDP

slide16

The Singapore economy contracted by -2.0% in 2001

Overall

Services-Producing Industries

Goods-Producing Industries

exports industrial output fell sharply

Domestic Exports

Fall in

External

Demand

NODX

Drop in NODX

Electronics

Cutback in

Production

Industrial Production

Overall

Electronics

Exports & industrial output fell sharply
services exports were also affected

Fall in

External

Demand

Drop in NODX

Cutback in

Production

Services exports were also affected

Re-Exports

ASEAN-3

Total

NIE-3

Q1

Services Exports

Overall

Spillover to

Services Sectors

Transport

Travel

Q1

slide19

LD

LS

LD1

C

A

X

X

B

X

Adjustments in theLabour Market

W/P

N

slide20

W - CPF

- non CPF

Flexible wage response

Average Nominal Earnings, SA

85Q1=100

97Q4=100

00Q4=100

No. of quarters

slide21

-10

-8

-6

-4

-40

-20

0

0

-1

-2

-3

2

GDP Downturn in

2001

3

1998

1985

4

Comparisons Across Downturns

Summary of Key Indicators : Peak-to-Trough Adjustments

Real GDP

-7.7 (3Q)

-3.1 (3Q)

-5.3 (3Q)

-28.4 (4Q)

-7.7 (4Q)

-12.9 (2Q)

Exports

CPI

-0.9 (3Q)

-1.6 (4Q)

-2.0 (4Q)

2.1 (4Q)

2.7 (5Q)

3.6 (7Q)

Unemployment Rate

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
slide24

US economy

Personal Consumption

GDP

Non-Residential Fixed Investment

slide26

Manufacturing driving the uptick in growth

Manufacturing Value-Added

Surge in manufacturing SAAR in Q4 2001 continued into Q1 2002…

Non-oil, Non-electronics

…along with positive NODX growth in the last two quarters...

NODX

Electronics

hub related services doing well
Hub-related services doing well.
  • Re-exports supported by regional trade

Real Non-oil Re-exports

Air Transhipment Cargo

  • Singapore provides hub services
divergent paths
Divergent Paths?
  • Electronics-led initially

Non-electronics(SAAR)

Electronics(SAAR)

Total(SAAR)

  • Chemicals surge more recently
  • Chemicals has less spillovers

Apr-May

world demand domestic supply curve1

DS1

WD1

S$175

US$1.75/S$

WD3

WD2

S$170

US$1.70/S$

Q2

Q3

Q1

World Demand-Domestic Supply Curve

Price Level (Domestic currency)

Real GDP

macroeconomic policy mix
Macroeconomic Policy Mix

Expansionary Fiscal Policy

off-budget packages

Easier Monetary Conditions

multiplier effect

1.3% point

boost to economy

slide32

Outlook for Growth

Manufacturing sector

expected to turn in

steady growth

GDP Growth

to come in at the

upper half

of the

2-4% forecast range

Moderate rebound

for the

services sector

Financial services

sector

to remain weak

Construction sector

expected to contract

further

summary iii

Equity Markets

Real Economy

Consumption

(Wealth Effect)

Investment

(Profit Cycle)

IT Spending Slump - Postponement of replacement demand

Summary III
  • Led by initial turnaround in the US
  • Led by electronics & trade-related services
  • Conducive Macro-Policy Mix
  • Risks to Growth
slide34

V.A. (real terms)

X t

YOY %

X t - X t-12

* 100

X t-12

QOQ %

X t - X t-1

* 100

X t-1

QOQ SAAR

XSAt

((

)^4 - 1) * 100

XSAt-1

Conventions used in data presentation

slide35

% deviation from baseline

XAt - XBt

* 100

XBt

Baseline Values : XBt

Alternative Values : XAt