Economy
Singaporeans consider their economy to be one of the greatest success stories in history. This is largely thanks to its location, which makes it the nexus for intra-Asian trade.
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Highlights
- Singapore is one of the world’s most competitive economies. It sits at the top of many indices measuring all aspects of life in the city-state and has a stable macro-economic environment with healthy public finances.
- This is one of the world’s top financial centres, behind London, New York, Shanghai and Hong Kong. State-of-the-art technology, low taxes and efficient transport and infrastructure help keep Singapore ahead of the race.
- Singapore has 25 free trade agreements with more than 30 trading partners, maximising the city-state’s economic benefits.
Testament to this belief is the fact that Singapore is Southeast Asia’s smallest country, yet it’s home to more than 7,000 multinational corporations and 150 international organisations.
Offering excellent access is one of the keys to Singapore’s success. With exposure to fast-growing regional markets, Singapore is a transportation hub for both sea-going containers and air cargo. The container port is one of the busiest in the world and Changi International Airport has one of the most impressive air-route networks in Asia.
Singapore is now in the process of restructuring its economy in a bid to scale down its dependence on overseas workers, boost productivity and move towards more high value knowledge and tech-driven businesses.
The government hasn’t borrowed to finance any deficit expenditures since the 1980s and Singapore has no external public debt. Given the financial shocks that have seriously affected most of the world since 2008, this is a major achievement.
Regional economies
Singapore is a free port, a logistics hub for the region’s commercial activities. It’s also part of the ASEAN free trade area. The city-state is considered an excellent base for international and overseas companies looking to expand in Southeast Asia and the Asia-Pacific region as a whole.
The city-state has 25 free trade agreements with more than 30 trading partners. It’s a country with a small domestic market and therefore places the highest priority on the World Trade Organization’s multilateral trading system.
China is Singapore’s largest trading partner and has been since 2013. China imported 13.8% of Singapore's exports in 2020, followed closely by Hong Kong, which imported 12.4%. Singapore is also one of the largest investors in China as well as being Indonesia’s biggest backer.
However, Singapore’s strengths are also its vulnerabilities. The economy is highly dependent on global trade and its cyclical nature. Faltering growth rates in China concern economists in the city-state, as does its dependence on global finance.
Exports & imports
Singapore is a strong, export-driven economy and its key sectors include oil, commodities trading, electronics and tourism. It also has one of the highest trade to GDP ratios in the world. But this makes it one of the most exposed economies in Asia. The Straits of Malacca, literally on Singapore’s doorstep, is the world’s busiest shipping lane, while the city-state’s ports are some of the busiest in the world. Annually, more than 130,000 ships call at Singapore. This spot where East meets West boasts the world’s busiest trans-shipment hub with 30% of Asia’s trade passing through Singapore.
In 2020, Singapore exported USD374.2 billion worth of goods. 71% of Singapore's exports went to Asian countries, 10.6% to European trading partners and 11.4% went to countries in North America.
The trade-reliant city-state had been enjoying an upturn in exports because of a global trade rebound.
Financial services
Singapore is ranked as one of the top financial services centres in the world and goes head-to-head with Hong Kong in terms of leading the field in Asia, depending on which index you consult.
The city-state’s government policy is geared towards meeting the needs of the finance sector, with Singapore acting as a strategic business hub for ASEAN. It is predicted that as a financial centre Singapore is expected to grow in the years ahead.
The Monetary Authority of Singapore (MAS) created an "industry transformation map" for this sector including wealth and asset management, foreign-exchange trading, insurance and financial technology (FinTech) businesses, to create new jobs and support start-ups.
The MAS is particularly focusing on FinTech and US$2 billion of capital was made available to fintech start-ups.
1 Singapore Department of Statistics, 2021
2 Ministry of Trade and Industry, 2022
3 Trading Economics, 2022
4 World Bank Group, 2022
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