Introduction
Economic performance is an important aspect that every country needs to consider if it intends to monitor its progress development-wise. Conducting this performance reviews involves reviewing the Gross domestic product values that a country registers every year and formulates a trend upon which certain conclusions can be drawn. The information obtained from this process is very reliable which means that decisions can be made based on this. Therefore, the essence of this paper is to apply various macroeconomic concepts to the economy of Singapore. From the information, it is possible to extract significant information such as unemployment rate in the country and even the inflation rate. The article will be a report on an analysis of the economic performance of Singapore after which a conclusion of whether the economic performance of the country is strong or weak will be made.
There are certain macroeconomic indicators that this article will utilize in pursuit of understanding the challenges that the economy is facing. Gross Domestic Product is one of the economic growth indicators and can be described as the monetary measure of the value of the goods and services that a country produces within a specified period. It is an essential estimate that can be used in the determination of the economic performance of a region or even a whole country (Fion, 2010). Thus, it will be a valuable contribution to this research essay. Another measure that this article will use to measure of the economy of Singapore is the real GDP per growth rate which technically is a derivative of the original GDP. However, it is a valuable contributor towards the achievement of the objectives of this article since it points to whether the economic status of a nation is okay or possible depressions.
Real GDP per growth rate and real GDP per capita perform this very function of providing a basic picture of how the economy is. Thus, it is a crucial point of decision making since it decides if a country should install recovery policies or not. It also alerts the country of possible inflations that may hit the country’s economy allowing the country to cushion itself from depressions. These depressions have dire consequences on the economy which mean that a country seeking to develop will work towards arming themselves with these macroeconomic tools. This essay will consider data obtained from the Singapore government website which has been exposed to mathematical manipulation to provide certain information such as unemployment. Using these macroeconomic indicators, this essay will be able to tell the state of the economy of this country and thus accentuate the essentiality of conducting frequent economic performance reviews.
Production output performance analysis
That is measurable through the use of GDP which as stated above describes the value at which the final goods and services in a country receive in a market. The nominal GDP is the one that is used to provide estimations of economic performance and is normally referred to as real GDP. The value of the real GDP of Singapore has been varying ever since 2010 so that it was 15.1 percent that year. There was a significant drop as the real GDP percentage of the country dropped to about six percent in 2011. A drop of about nine percent is a significant shift towards the negative side which means that the economy suffered greatly at the time. The drop furthered to 1.9 percent the following year which means that the country was facing serious economic shortcomings (Sidhu R., 2009).
These recorded drops in the value of the real GDP are evidence of the economic recession that hit the country in 2011. History records Singapore as the first Asian country to be hit by an economic recession. The reason behind this recession can be traced back to the very first decade of the twenty-first century which ended with a global financial crisis between 2008 and 2009. The crisis climaxed with the collapse of the American investment bank Lehman Brothers in the September of 2008 (Country reports, 2016). That was the start of the problems of Singapore as the collapse of this bank initiated the banking crisis that affected the United States of America. The banking crisis caused ripple effects that resulted in stress to the Singapore economy forcing it to be the first Asian country to fall prey to a recession. History records it as one of the worst recessions that the country has ever faced.
The effects of this recession were massive, and evidence is the news where the country lost its sovereign wealth funds just because they were exposed to the US ‘toxic assets.’ Even the ordinary citizens felt the ripple effects of the global financial crisis that trickled down to Singapore’s economic recession. Those that had put their savings in the financial products such as the Lehman’s minibonds that the US bank provided were left with remorse when their investments became sour (Lo, 2010). These citizens went to the public to demand their money back and condemn the brokerages that sold them the products. The Development Bank of Singapore was at the center of the minibond fiasco where it took extremely drastic measures of retrenching over nine hundred staff members in the year 2008 in a bid to reduce operational costs. That is evidence of how the economy suffered as a result of the recession that lasted from 2008 to 2010.
The GDP in 2013 spiked to an average of 4.1 percent which was a remarkable improvement from the previous year’s 1.9 percent. That was evidence of recovery and a chance for the country to remodel its economy. In 2014, the GDP slightly dropped to 3.4 percent and shot back to 4.1 percent in 2015. The projected average for the four quarters in 2016 is projected to be around 4.2 percent which is a sign of stability (Bhaskaran, 2014). After experiencing the effects of the financial crisis, it is very difficult for the country to allow themselves to be found unprepared. From 2013 to 2016, the GDP values can be termed as stable which means that the country’s economy is recovering. Using these financial and forecasting methods, they can project the future and draw conclusions from them. That allows the country to prepare for the future by employing strategic management processes to boost the country’s productivity.
Labor market analysis
The labor market is also an important consideration point for this article since it is affected directly by the country’s economic performance. The economy of any country is fed directly by the different organizations that pay various tax revenues to the country. These organizations, therefore, directly affect the economy of the country. An organization has members who work within the firm to achieve specific organizational goals. Where the firms get these employees is the labor market which is not necessarily physical. Since the most important resource of the organization is its human resource, they are subject to the forces of demand and supply. Thus, it is necessary for employers to understand how the forces of demand and supply interact within the labor market if they are to survive the challenges that come with it. The unemployment rate in Singapore has been stable.
In 2010, the unemployment rate hit 2.2 percent which was a decrease from the previous years, and that is attributable to the economic recession between 2008 and early 2010. The recession reduced the ability of organizations to employ and sustain workers within the economy (Kumar, 2013). Therefore, in a bid to reduce the operation costs and widen profit margins, organizations sought to retrench workers and force others to retire. That increased the number of unemployed persons within the economy. However, the rate has remained relatively stable revolving around an average of 2.0 which is attributable to the fact that the economy is recovering. It was a discovery earlier that the GDP values were stable between 2013 and 2016 and it is within this period that the unemployment rate is also stumbling around 2.0. That is a sign that the economy is healing and regaining from the economic recession that hit it.
However, a primary challenge that is affecting the labor markets in Singapore is the fact that the aging population is growing resulting in a challenge to the social safety. A growing retiree population means that the country has to spend more on providing for this group of people which strains the country financially (Sidhu M., 2009). That forces the government to over-tax corporations reducing their profit margins and ultimately their ability to recruit more workers. In the end, it strains the labor market. Moreover, it results in a tight labor market because of the competition to get jobs in the country. That is a negative impact since it reduces the ability of the economy of Singapore to adapt to the changing international labor policies. The great recession is also a reason why the labor market in Singapore is strained as it caused an increase in the unemployment rate creating unhealthy competition among potential workers.
Price level analysis
An indicator of economic growth revolves around the determination of price levels in the country within the period under study. From looking at price levels, it is possible to identify phenomenon such as inflation. Economic scholars (Phelps, 2007) define it as a sustained increase in the price levels of the services and goods within an economy within a specified period. The phenomenon occurs in a manner where each unit of currency will now pay for fewer goods and service. The inflation rate has a regressive effect on the economy of a country because it prevents development. By reducing the disposable amount that the people can have at any given time, it reduces the possibility of these people saving their money. That means that these people have no means of developing themselves since they cannot start businesses. Inflation also increases the rate at which people take up loans which also slows down economy.
In Singapore, the inflation rate was benign in 2013, but there are chances that there will be the development of upward pressures. In 2013, the average inflation rate stood at 2.4 percent in 2013 (Dimmock and Goh, 2011). The softness of the economic activities within the boundaries of the country as well as the global commodity prices have been instrumental towards keeping the inflationary pressures in balance in 2013. 2014 brought changes to all this as upward pressure started following mild increases in commodity prices whenever the global demand for these commodities increased. Another cause of upward pressure is that the businesses always opt to pass the rising labor costs to their customers so that they can maximize their profits. That results in increases in the prices of the commodities in the country. Thus, there are price pressures that are causing higher price level inflations in the country.
Another conclusion that can be drawn revolves around the fact that the weakness of the local currency could promote imported inflation in the short term but not in the medium and long terms. Comparing the strength of the American dollar and the US dollar, there is a possibility of a mild inflation in the short term based on divergent monetary policy changes expectations between the US and Singapore. The positive balances that can be seen in the external accounts of the country reveal that there is still a chance of the Singaporean dollar to regain its strength. The advantages of a stable currency are immeasurable starting with the fact that it is very attractive to investors (Country Intelligence, 2014). A sure way of attracting investors is by ensuring that the currency is reliable. Currencies that seem weak pose a serious threat to the investors losing their money which discourages them.
Conclusion
References
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