Singapore: Market Profile

Major Economic Indicators

Source: Singapore Department of Statistics, Ministry of Trade and Industry, IMF

Latest Development

• Singapore’s economy expanded by 4.1% in 2013 on accelerated growth in both the manufacturing and services sectors, up sharply from the 1.9% growth in 2012.
• In 2013, Singapore’s exports grew moderately by 0.5%, following a decline of 0.2% in 2012. Imports decreased by 1.8% after a 3.9% rise in the preceding year.
• In 2013, Hong Kong’s exports to Singapore rose 4.7% to US$7.5 billion, while imports from Singapore were maintained at US$31.6 billion as in the previous year.

Current Economic Situation

Domestic Economy

In 2013, Singapore’s economy expanded by 4.1%, accelerating from a 1.9% growth in 2012. While the Ministry of Trade and Industry’s (MTI) put in an advance estimate that the economy may grow 2-4% on the back of reviving external demand from the US and Europe, a survey of more than 20 private economists conducted by the Monetary Authority of Singapore (MAS), Singapore’s central bank, put the expected GDP growth at 3.8% for 2014.

Singapore’s services sector contributes about two-thirds of the country's GDP, with the retail and wholesale trade sector being the largest component, which accounted for 16% of GDP in 2013. Retail and wholesale trade went up by 5% in 2013, recovering from an anemic 1.4% contraction in 2012. Growth was mostly driven by the better performance in both foreign and domestic wholesale trade, while retail sales contracted due to softer motor vehicles sales, as the government imposed further restrictions on car purchases in 2013 (for example, the more stringent motor vehicles loan regulation).

The financial services sector grew 10.6% in 2013, much faster than the 1.3% growth in 2012. Conversely, business services rose 5.1% in 2013, a tad slower than the 5.9% growth in 2012.

In recent years, Singapore has been keen to develop its MICE industry (i.e. Meetings, Incentives, Conventions and Exhibitions) as a growth engine for the country. According to the latest Global Rankings by the International Congress and Convention Association (ICCA), Singapore has retained its spot as the only Asian city in the Top Ten Convention Cities in the world.

Singapore’s manufacturing sector was a major contributor to GDP growth in 2013, accounting for 26% of GDP for the year. In the sectoral breakdown, electronics production, which was the largest component and accounted for 30% of all manufacturing activities in 2013, expanded by 3.5%, reversing the 11% contraction in 2012. Biomedical manufacturing was the second largest sector in manufacturing for the same year, recording flat growth. Overall, the manufacturing sector expanded 1.7%, improving from the 0.3% growth in the preceding year thanks to the strong growth in the transport engineering cluster and the electronics cluster.

With a view to achieving quality economic growth, Singapore announced in its Budget 2013 a further lowering of the foreign worker dependency ratio from 45% to 40% for the services sector. According to Budget 2014, the government will continue its effort to drive economic growth with higher skills, innovation and productivity by raising foreign worker levies on low-skilled construction labour. Besides, in achieving “a fair and equitable society”, Budget 2014 gave details on the “Pioneer Generation” package designed in recognition of the contributions that Singapore’s pioneers have made to the country, focussing mostly on medical benefits. It is estimated about 450,000 Singaporeans will fulfil the qualifying criteria.

Singapore’s overall unemployment rate was recorded at 1.9% in 2013, down from 2.0% in 2012. Inflation rose 2.4% in 2013 compared with an increase of 4.6% in 2012.

External Trade

Singapore's exports rose by 0.5% in 2013. Major export items were refined petroleum products, electronic components & parts, and food & beverages. Major export markets included Malaysia, the Chinese mainland, Hong Kong, Indonesia, the EU and the US.

Singapore's imports decreased by 1.8% in 2013. Major import items included electronic components & parts, and crude petroleum. Major sources of imports included the EU, the Chinese mainland, Malaysia, the US, and Taiwan.

Free Trade Agreements (FTAs)

Singapore has been active in establishing strategic relationship with its trading partners, typically through concluding FTAs. Bilateral FTAs have been signed with Jordan, Japan, Korea, Australia, New Zealand, China, the US, Panama, Peru, India, Costa Rica and the EU, with ongoing FTA negotiations with Canada, Mexico, Pakistan and Ukraine.

At the regional level, Singapore along with other ASEAN members have concluded agreements with Australia and New Zealand (AANZFTA), China (ACFTA), India (AIFTA), Japan (AJCEP) and Korea (AKFTA). Following the signing of the Trade in Goods Agreement under AIFTA and AJCEP, ASEAN have proceeded on negotiations on services and investments with India and Japan. Furthermore, negotiations of Trans-Pacific Partnership (TPP), which initially comprised the four members of Singapore, Brunei, Chile and New Zealand, have expanded to include the US, Australia, Peru, Vietnam, Malaysia, Mexico, Canada and Japan.

China and Singapore signed the China-Singapore Free Trade Agreement (CSFTA) in October 2008 after two years of negotiations. CSFTA is a comprehensive bilateral FTA with trade-in-goods and trade-in-services elements. Under CSFTA, which took effect from January 2009, more than 85% of Singapore exports to China are granted zero-tariff access. Key exports benefitting from the zero-tariff arrangement include petrochemicals, processed foods, and electronics and electrical products.

Singapore’s network of FTAs had covered over 20 bilateral and regional FTAs as of 2014. These FTAs have eliminated trade barriers so as to facilitate trading between Singapore and other countries.

Import Policy

Singapore adopts a liberal trade policy. Very few goods are dutiable or under control. High tariffs are imposed only on liquor, tobacco, petroleum products and motor vehicles.

The country imposes no quota restrictions. Most goods can be imported freely without licences. However, import licences are required for pharmaceuticals, hazardous chemicals, films and videos, arms and ammunition.

In addition to FTA commitment to eliminate import tariffs, Singapore has also agreed to remove tariffs in phases on goods imported goods from its APEC counterparts.

Hong Kong's Trade with Singapore

Singapore is the ninth largest export market for Hong Kong. Singapore remains the largest trading partner of Hong Kong in the 10-nation ASEAN, but Vietnam surpassed Singapore to be Hong Kong’s largest export market in the trade bloc.

In 2013, Hong Kong’s exports to Singapore rose 4.7% to US$7.5 billion. Major export items included semi-conductors, electronic valves & tubes (16.2% share), telecom equipment & parts (15.1%), non-electric engines & motors, & parts (7.6%), electrical apparatus for electrical circuits (4.8%), and jewellery (4.4%).

On the other hand, Singapore is the fourth largest import source for Hong Kong. Imports from Singapore maintained at US$31.6 billion in 2013. Major import items included semi-conductors, electronic valves & tubes (56.9% share), petroleum oils (other than crude) (14.2%), parts & accessories of office machines /computers (3.9%), telecommunications equipment & parts (3.5%), and computers (1.8%).

Singapore's Involvement in the Hong Kong Economy

Singapore is well represented in the finance, logistics, electronics and information communications technologies and other services sectors of the Hong Kong economy. Prominent examples include the DBS, Oversea-Chinese Banking Corporation (OCBC), United Overseas Bank (UOB), Keppel Logistics, Singapore Airlines, Pacific International Lines, Singapore and Technologies Electronics Limited (ST Electronics).

Singapore’s companies are widely involved in Hong Kong’s economy. As at 1 June in 2013, Singaporean companies had established 41 regional headquarters, 86 regional offices and 200 local offices in Hong Kong. As at end-March 2013, there were 8,574 Singaporeans living in Hong Kong.