Singapore’s Economy

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take up to 3 months too. The unemployments in this category are usually short term.

Structural unemployment is when unemployment rate is at 2-3%. This happens when there is a shift in the economy that creates a mismatch of skills between the worker holds and the skills that the employers need.

Examples for this category would be a change in technology, like older models of planes needed a navigator on board to navigate the route safely, but with technological advancements like GPS and autopilot mode, it completely removed the need for the particular occupation of navigators, creating a large pool of unemployed. Another example would be foreign competition, where a company moves its factory or headquarters out of the country and into another which have cheaper labour available, like a company would move their offices from Singapore to the neighboring country Malaysia when they want to cut down on costs as Singapore’s labour and standard of living is much higher.

The third type of unemployment is Cyclical unemployment, when the unemployment rate is above 4%. It is not part of the natural unemployment rate and is caused by the contraction phase of the business cycle. That’s when demand for goods and services fall drastically, forcing businesses to lay off large numbers of workers to cut costs.As the newly unemployed now have less disposable income. This further lowers demand and business revenue, leading to even more layoffs.( What Is Cyclical Unemployment?, 2017)

Government intervention, in the form of expansive monetary policy and even fiscal policy, is usually required to stop the downward spiral.(Types of Unemployment, 2016)

Examples of this unemployment would be when there was a stock market crash in 1929, the government did not step in right away which lead to the Great Depression that lasted 10 years and brought the unemployment rate to 25% in the United States.

3.2 Unemployment Trend

As the chart shows, the unemployment rate in Singapore was the highest at 3.3% in 2009, sitting at the structural unemployment but was very close to cyclical unemployment. This record high of unemployment rate could be due to the financial crisis of 2008, as Singapore’s economy has seen a stable average of frictional unemployment through the years with the exception of 2008-2009. And with the unemployment rate dropping back to its average of 2.3% in 2010, it can be seen that the government intervened by the expansion of the Integrated Resorts which triggered a bloom in the tourism industry, and further creating more jobs.

3.3 Government Measures - Unemployment

The Singapore Government intervened in 2009 with the measures introduced called the Resilience Package that consisted of 5 components; Jobs for Singaporeans, Stimulating Bank Lending, Enhancing Business Cash-flow and Competitiveness, Supporting Families and Building A Home for the Future. These measures includes putting in a certain budget of the country’s reserves into aiding the economy and the citizens through helping Singaporeans stay employed with upgrading of workforce skills, ensuring companies have viable credit to continue operations and keep jobs, enabling tax concessions to companies, giving direct monetary support to the Singaporean households and also bringing forward infrastructural projects.(Budget 2009 : Resilience Package.(2009) These measures greatly reduced the unemployment rate and helped by reducing the impact the citizens and economy would had felt due to the 2008 financial crisis leading the global economy into recession.

4. Price Level Analysis

4.1 Inflation Trend

Inflation rate is calculated by the Consumer Price Index (CPI), whether there is a rise or drop will affect the inflation of goods and services. As seen from the graph, Singapore had a fluctuating inflation rate in 2008 due to the financial crisis but has since then seen a negative inflation rate since 2013-2014 where it stabilized.

4.2 Causes of Inflation

There are various causes of inflation in Singapore but recently mainly the private transportation and property has the largest impact. The main cause for the sharp jump in 2012 from 0.3% to 4.6% was due to an inflation triggered by the accommodation and private road transport which contributed more than two-thirds of inflation for the year 2012.

4.3 Government Measure - Inflation

The Singapore government have many policies implemented to reduce inflation, namely for example is the monetary policy, which is controlled by Singapore’s central bank - the Monetary Authority of Singapore or MAS.Singapore is the only major economy in the world to use the exchange rate, guiding the Singdollar higher or lower. MAS lets the Singdollar rise or fall against an undisclosed basket of currencies of its main trading partners, intervening when needed to keep the exchange rate within its unspecified target band.(10 things you should know about Singapore’s monetary policy, (Oct 2015) And as Singapore’s economy is based off imports, controlling the strength of the dollar would allow the government to control the costs of goods and services coming in as the payment is made via foreign currency, hence if the inflation goes up, MAS could increase the rate of the Singapore Dollar to deem the prices to fall when trading with other countries. Hence controlling the inflation rate with ease.

Conclusion

The Singapore government have successfully mitigated most of the financial crisis the world had faced for the past decade.The companies and citizens within the national can be unfrayed to have full trust in the government and its measures when it comes to its economy stability. As seen from the various trends and implementations of the very efficient government, it can only be concluded that the Singapore’s economy will only continue to prosper at this rate if there is no financial and economical crisis inbound.

References

https://en.wikipedia.org/wiki/Economy_of_Singapore

Singapore Medtech Portal (Singapore’s Economic Climate and Competitive Advantages) [website] Retrieved from

http://www.medtech.sg/singapores-economic-climate-competitive-advantages-in-the-biomedical-sciences/

Conrad Alvin Lim (December 2015)