•Singapore’s economic expansion slowed to a modest pace of 1.9% year-on-year (YoY) in the second quarter of 2012 due to a continued contraction in the manufacturing sector.
•In June 2012, Singapore’s exports decreased by 0.4% YoY, down from an expansion of 3.2% in May 2012. Imports increased by 6.2% YoY after a 6.0% rise in the preceding month.
•In the first five months of 2011, Hong Kong’s exports to Singapore contracted 2.8% YoY to US$2.9 billion, while imports from Singapore fell by 4.1% YoY to US$12.9 billion.
Current Economic Situation
In 2011, the pace of GDP growth of Singapore eased to 4.9%, much lower than 14.8% in 2010. Growth deceleration continued in Q2 2012, which expanded at 1.9% YoY, according to the Ministry of Trade and Industry’s (MTI) advance estimates. On a seasonally adjusted annualised basis, real GDP contracted by 1.1% quarter on quarter (QoQ) compared to the 9.4% expansion in Q1 2012.
Singapore’s government expects economic growth for 2012 to be within a range of 1-3%, slowing down considerably from the hefty pace of 2011.
The overall unemployment rate was recorded at 2.0% (overall) and 2.9% (resident) in 2011, down from 2.2% (overall) and 3.1% (resident) in 2010. Inflation rose 5.2% in 2011 compared with an increase of 2.8% in 2010.
Singapore’s manufacturing sector was a major contributor to GDP growth in 2011, accounting for 20% of GDP for the year. In the sectoral breakdown, electronics production, which was the largest component and accounted for 30% of all manufacturing activities, contracted by 13% YoY, reversing the 36% gain in 2010. Biomedical manufacturing was the second largest sector in manufacturing for the same year.
In Q2 2012, the manufacturing sector declined by 6% YOY, reversing the 20.9% expansion in the preceding quarter. According to the MTI, the slowdown reflected a large decline in the biomedical manufacturing output, which offset the growth in the transport engineering cluster.
The wholesale and retail trade sector, accounting for 17.4% of GDP in 2011, posted a YoY growth of 1.1%, which is significantly lower than the 15% growth in 2010. The moderation in growth momentum was mainly due to weak performance in both foreign and domestic wholesale trade. Nevertheless, retail sales grew 3.7% in 2011 compared to a 2.5% decline in 2010, thanks to healthy visitor arrivals and household consumption.
The financial services sector grew 9.1% in 2011, lower than the 12% growth in 2010. On the other hand, business services rose 2.7% in 2011, slower than the 6.2% growth in 2010.
Singapore’s services sector contributes more than two-thirds of the country's GDP. 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. In 2011, the number of conventions, conferences and tradeshows in Singapore surged by 46%. 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 Five Convention Cities in the world.
With slower economic growth, Singapore announced in its Budget 2012 a lowering of the caps for foreign worker dependency ratio from 65% to 60% for the manufacturing sector, and from 50% to 45% for the services sector. The government intended to drive economic growth with higher skills, innovation and productivity. Besides, several measures were implemented to help SMEs restructure, including a one-off cash grant and enhancement of Productivity and Innovation Credit.
Singapore's exports rose by 7.5% in 2011. Major export items were refined petroleum products, electronic valves, and parts for office & data processing machines. Major export markets included Malaysia, Hong Kong, Indonesia, the Chinese mainland, the EU and the US. In June 2012, Singapore’s exports contracted 0.4% YoY, down from 3.2% YoY expansion in the previous month. The contraction of exports was due to a YoY decline of 2.8% in oil exports, compared to a YoY increase of 22% in May 2012.
Singapore's imports grew by 8.6% YoY in 2011. Major import items included refined petroleum products, electronic valves, and petroleum crude. Major sources of imports included the EU, Malaysia, the US, the Chinese mainland and Japan. Imports increased by 6.2%, after a 6.0% rise in the preceding month.
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 and India, with ongoing FTA negotiations with the EU, 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 launched the negotiations on services and investments with India and Japan. Both negotiations are targeted to be concluded by the end of 2012. 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 and Canada.
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 18 bilateral and regional FTAs with 24 trading partners as of April 2012. These FTAs have eliminated trade barriers so as to facilitate trading between Singapore and other countries.
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.
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