Singapore is a nation with little to natural resources, and has to rely largely on imports as well as exports to grow this economy of ours. Based on share of GDP by industry in 20161 , Singapore’s economy is most reliant on these sectors: Manufacturing (19.6%), Business Services (15.8%), Wholesale and Retail Trade (14.2%), Financial and Insurance (13.1%) , Transportation and Storage (7.6%) and then Construction (5%).
To illustrate the importance of trade to Singapore, Singapore has one of the world’s highest trade to GDP ratio of 318% as of 2016.2
This ratio which is derived from dividing total trade of a country by its total GDP and may been seen as a measurement of globalisation. From here, we know that Singapore is heavily trade reliant, and is an open economy which allows it to do trade. In trade conducted, Singapore exports more than imports. Take for instance, the year 2016, whereby Singapore exported $315B and imported $259B, resulting in a trade surplus of $55.4B. This is greatly helped by our trade-friendly policies as well as skilled workforce. However, the outlook of Singapore’s trade is set to change. In recent years, Singapore has faced increasing threats to the growth of its economy in the form of export cost competitiveness as well as imported inflation of rising food and oil prices which our workforce rely heavily on. All this while, Singapore has been relying on a unique monetary policy conducted by Monetary Authority of Singapore(MAS), which is the central bank of Singapore, that also issues currency, ________among other functions.MAS monetary policy is to allow the Singdollar(SGD) to rise or fall against an undisclosed basket of currencies of its main trading partners, such as China, EU, Malaysia, United States, but still come to intervene when needed to keep the exchange rate within its unspecified target band. This trade-weighted exchange rate is known as the Singapore dollar nominal effective exchange.MAS adjusts the pace of appreciation or depreciation of SGD by changing the slope, width and centre of this trading band to manage against inflation1 .To combat an ageing population as well as stiff competition among countries, Singapore has been relying on improving productivity in recent years through the adoption of newer technology as well as many government efforts such as CPF, forcing Singaporeans to set aside a percentage of their salary for future use, SkillsFuture programmes to improve and deepen the skill sets of Singaporeans as well as the encouraging of research and development with developments in one-North such as Agency for Science, Technology and Research (A*STAR), Biopolis and Fusionoplis.
All this seems futile as with rising costs such as salaries within Singapore’s export industry, and yet unchanged productivity, of which, can be explained by mainly- Singapore’s foreign labour laws, coupled with cheaper labour costs as well as operation costs elsewhere in Asia Pacific such as Vietnam, India and China- all this resulting in Singapore export competitiveness to decline. International consumers would much prefer to earn significant savings by purchasing cheaper equivalent of goods elsewhere from Singapore’s competitors as there is no point in paying more for the same goods.
This decline in export competitiveness has been seen from the loss of market share within the global goods trade, leading to expected slow increase or even a decline within exports in the future. This could lead to a lower economic growth due to exports being a primary source of income for Singapore’s GDP component. Thus, Singapore may require adapting