Singapore Economy

Economic

Summary:

Singapore is a high-income economy, renowned for its robust financial sector and a high degree of economic openness.

As one of the most competitive economies globally, it consistently ranks among the top nations for providing a business-friendly environment.

Since achieving independence in 1965, Singapore has undergone a remarkable transformation. From a small domestic market economy grappling with high unemployment and poverty, it has evolved into a highly developed, free-market economy driven by industrialisation and global trade.

The city-state is highly urbanised, with a population of approximately 5.96 million in 2024. English, one of Singapore’s official languages, serves as the primary medium of communication in business and government.

Singapore’s economic growth is primarily driven by exports and domestic demand. The country’s GDP experienced a significant contraction of 4.1% in 2020 due to the coronavirus pandemic. However, recovery was swift, with growth rebounding to 7.6% in 2021, the highest annual rate since 2010’s 14.5%. Growth moderated in subsequent years, with GDP expanding by 3.6% in 2022 and slowing further to 1.2% in 2023. Singapore Economy_1

While the IMF WEO October 2024 forecasted 2.6% growth in 2024, the Ministry of Trade & Industry (MTI) just said the economy grew by 4%. For 2025, the MTI sees growth slowing to a range of 1-3 %, citing geopolitical conflicts and higher uncertainty over US trade policies under the Trump administration. The IMF forecasts 2.5% growth in 2025.

The country’s GDP per capita remains one of the highest globally. In 2024, GDP per capita is estimated to be $104,127, underscoring Singapore’s status as a global economic leader.

While unemployment exists, it remains minimal due to structural changes such as outsourcing lower-skilled jobs. The unemployment rate stood at 2.7% in 2023 and is projected to come down to about 2% in 2024.

Currency and Central Bank

The Singapore dollar (SGD) is the official currency of Singapore and is divided into 100 cents. It is commonly denoted by the dollar sign ($) or S$ to distinguish it from other dollar currencies. Banknotes and coins are issued by the Monetary Authority of Singapore (MAS), the country’s central bank.

As of 2024, the Singapore dollar remains one of the strongest currencies in the Asia-Pacific region and continues to play a key role in international trade and finance. It is also among the top traded currencies globally, ranking 11th in 2021 and maintaining its prominence in recent years due to Singapore’s stable economic environment and sound financial policies.

In addition to its role as a central bank, the MAS serves as Singapore’s financial regulatory authority, overseeing banking, insurance, securities, and the broader financial sector. The MAS is currently led by its chairman, Ravi Menon, following Tharman Shanmugaratnam’s tenure.

Inflation in Singapore has moderated after reaching a peak of 6.1% in 2022. In 2023, inflation eased to 4.8%, reflecting tighter monetary policies and stabilising global supply chains.

According to official data from MAS, core and headline inflation in 2025 are both expected to average 1.5 – 2.5%, compared to the 2024 forecast of 2.5 – 3.0% and around 2.5%, respectively.

Industry and Trade

Singapore’s economy is predominantly driven by the services and industrial sectors. According to the Singapore Department of Statistics, services industries contributed over 70% to the nominal value added, while goods-producing industries accounted for about 25%.

The manufacturing sector remains a cornerstone of Singapore’s industrial landscape, comprising approximately 18.6% of GDP. Key industries include electronics, petrochemicals, biomedical sciences, logistics, and transport engineering. Notably, the electronics cluster has experienced a resurgence, supported by strong demand for smartphone, PC, and AI-related chips, according to the Ministry of Trade and Industry (MTI).

Within the services sector, wholesale trade represents a significant portion. In the first quarter of 2024, the domestic wholesale trade index declined by 2.2% year-on-year, while the foreign wholesale trade index increased by 3.4%.

The finance and insurance sector also demonstrated robust growth, expanding by 6.7% year-on-year in the second quarter of 2024, driven by the banking and fund management segments. Singapore Economy_4

Singapore relies heavily on its export sector. Top exports include machinery and equipment, petroleum products, chemical products, miscellaneous manufactured articles, and oil bunker.

Biggest imports include machinery and equipment (including electronics), crude oil, miscellaneous manufactures and chemical products.

The nation’s primary trading partners are China, the United States, Malaysia, the European Union, Taiwan, and Hong Kong. In 2023, Mainland China, the US and Malaysia were Singapore’s top trading partners. Singapore’s exports to Mainland China exceeded Singapore’s imports from Mainland China, while Singapore’s imports from Malaysia and US exceeded exports to these trading partners.

Stock Exchanges and Capital Markets

The Singapore Exchange or SGX is the sole stock exchange in the country. It is a multi-asset exchange that operates equity, fixed income and derivatives markets, and provides listing, trading, clearing, settlement, depository, and data services. It is the largest stock market exchange in Southeast Asia, with a total of 620 listed companies, as of September 2024.

The SGX uses the FTSE Straits Times Index or STI as its benchmark index. The STI is a capitalisation-weighted stock market index that tracks the performance of the top 30 companies listed on the SGX.

Approximately 40% of the companies listed on SGX are based outside Singapore, highlighting its role as a regional financial hub. SGX positions itself as a leading offshore market for equity index derivatives, covering major Asian economies with high liquidity. Notably, the exchange has expanded its derivatives offerings, including the GIFT Nifty 50 Index Options, which saw a significant increase in trading volume in 2024.

Along with London, New York, and Tokyo, Singapore is consistently listed as one of the world’s most active trading centres. SGX continues to enhance its market infrastructure and diversify its product offerings to maintain its competitive position in the global financial landscape.

Bond Market

Singapore’s bond market continues to attract both local and foreign investors, maintaining its position as one of the most developed in Asia. The country’s AAA credit rating from major agencies reflects its strong fiscal discipline and economic stability.

Singapore Government Securities (SGS) are a cornerstone of the bond market, comprising Treasury Bills (T-bills), SGS Bonds, Singapore Savings Bonds (SSBs), and Cash Management Treasury Bills (CMTBs). T-bills are short-term securities issued at a discount and maturing in 6 months or 1 year, providing returns upon maturity. SGS Bonds, in contrast, are longer-term instruments with fixed coupon rates and periodic interest payments, available in maturities ranging from 2 to 50 years. SSBs are designed for individual investors, offering step-up interest rates over 10 years and flexible redemption options. Meanwhile, CMTBs are short-term instruments primarily used for cash management purposes.

The MAS highlights several objectives for issuing SGS Bonds and T-bills. These include creating a liquid market to facilitate efficient trading, establishing a robust government yield curve as a benchmark for pricing other debt instruments, and supporting an active secondary market for cash transactions and derivatives to enhance risk management. Furthermore, the issuance of these securities encourages participation from both domestic and international issuers and investors, bolstering the growth and global integration of Singapore’s bond market.

Real Estate Market

Singapore’s real estate market exhibited mixed trends throughout 2024. In the third quarter, private residential property prices declined by 0.7%, marking the first decrease since the second quarter of 2023. This downturn was observed across all market segments, with landed property prices falling by 3.4% and non-landed property prices experiencing a marginal increase of 0.1%. For the first three quarters of 2024, overall private housing prices rose by 1.6%, a notable slowdown compared to the 3.9% gain during the same period in 2023.

Conversely, the public housing sector demonstrated robust growth. Resale prices for public housing units increased by 9.6% in 2024, nearly doubling the 4.9% rise observed in 2023. The number of resale transactions also grew by 8% year-on-year. Despite government interventions aimed at cooling the market, such as reducing the loan-to-valuation ratio for resale flats from 80% to 75%, demand remained strong. This surge is partly attributed to supply constraints and heightened demand, with fewer newly eligible units available for sale compared to previous years.

In the luxury segment, the market faced challenges due to policy measures. The Additional Buyer’s Stamp Duty (ABSD) for foreign buyers was increased to 60% in 2024, making Singapore one of the most expensive major cities for property purchases by foreigners. This move aimed to address concerns about housing affordability for locals and to temper speculative investments.

Looking ahead, the Singapore real estate market is projected to grow from $46.58 bn in 2024 to $64.04 bn by 2029, representing a compound annual growth rate (CAGR) of 6.57%. This growth is expected to be driven by affordable housing projects and increased demand for logistics and industrial real estate. Singapore Economy_5

Source:asia fund managers

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