The Economy

Since independence in 1965, the Singapore economy has experienced rapid economic development. Real GDP grew at an average rate of 8.4% per annum between 1965 to 2001, while real GDP per capita rose from about S$4000 in 1965 to over S$33,600 in 2001. Low inflation and unemployment rates, averaging 3.1% p.a. and 3.9% p.a. respectively, have accompanied growth. Singapore's strong economic performance reflects the success of its open and outward-oriented development strategy. Over the years, the composition of Singapore's exports has evolved from labour-intensive to higher capital- and skill-intensive products, such as electronics and chemicals. The importance of services to the Singapore economy also grew, as evidenced by the increasing share of the financial and business sectors of the economy. Of equal importance to Singapore's economic achievement is a set of sound macroeconomic policies aimed at maintaining a conducive environment for long-term investment in the economy. Fiscal policy is directed primarily at promoting long-term economic growth, rather than cyclical changes or distributing income. As a result of its healthy fiscal position and consistent budget surpluses over the years, Singapore has attained a high level of foreign reserves and the strongest sovereign credit rating for long-term foreign-currency debt in Asia. Unencumbered by fiscal concerns, the MAS is able to concentrate on its primary goal of ensuring price stability and maintaining confidence in the domestic currency. Since 1981, monetary policy in Singapore centred on the exchange rate. This reflects the fact that in the small and open Singapore economy, the exchange rate is the more effective tool in maintaining price stability. Singapore's longer-term economic strategies and policies are constantly re-evaluated to adapt to changing challenges and priorities over time. Currently, there are focused measures in place to develop Singapore as a world-class financial centre. For example, the MAS has liberalised the domestic banking and insurance industries to greater foreign participation. At the same time, the MAS has also adopted a more open and consultative approach in its supervision and development of the financial sector, and has shifted the emphasis from regulation to risk-focused supervision. Various initiatives have also been implemented to give fund managers greater access to domestic funds, develop the debt market and overhaul corporate governance. These initiatives together with Singapore's political and macroeconomic stability, excellent telecommunications and infrastructure, strategic geographical location and a skilled and educated workforce have contributed to Singapore's rapid development into a dynamic business and financial hub in Asia.