Sing a song of Singapore: Small Asian state an economic powerhouse

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DBS Bank economist Irvin Seah commented: “We see this moderation in growth as a healthy normalization of economic activities. And even with the growth momentum slowing down, the Singapore economy is still on track to meet its target of 15 percent growth.”

The wealthy island has recovered robustly from last year's recession -- an estimated 63,000 jobs were added in the first half of the year, according to the Ministry of Manpower. The benchmark Straits Times stock index has outperformed Asian markets in Hong Kong, Taiwan, China and Japan, while the Singapore dollar currency has risen nearly 4 percent against the U.S. dollar year-to-date (roughly in line with most other Asian currencies).

The Monetary Authority of Singapore, the nation's central bank, said inflation should remain at 'tolerable levels' of between 2.5 percent and 3.3 percent this year, despite some concerns over rising food and fuel prices. As such, the central bank finds the modest and gradual appreciation of the Singapore dollar an appropriate monetary policy.

Tourism is also flourishing -- more than 1-million visitors arrived in July (an all-time record) -- while exports climbed sharply.

“Our economy has rebounded strongly from last year’s recession,” Lee said. “Our workers can look forward to better wages, more overtime and higher bonuses this year.”

According to a report from the World Bank, Singapore's economy is considered to be the easiest in the world to do business in, possesses the most open and liberal economy for international trade, has among the lowest levels of corruption in the world and is the most competitive country in Asia.

However, unlike most of its neighbors, Singapore is a highly-developed, first-world economy (despite its high emerging-markets-like growth profile). Consequently, like its peers in Japan and Western Europe, Singapore is eager to compete in a dramatically changing global marketplace by increasing productivity; and, interestingly, it also faces something of a labor shortage due to a falling birthrate.

Prime Minister Lee has stated that Singapore will need to attract about 100,000 foreign workers this year (the country has a total population of about 5-million).

“This is critical to us,” he said. “Other countries are not only much larger than us, but have far deeper pools of talent than we have. We must make up for the shortage of Singaporean workers in our economy and the shortfall of babies in our population.”

The former British colony last went into recession in 2008 when the economy shrank from the second to the fourth quarters of the year.

The IMF recently stated that Singapore financial markets withstood the global recession very well.

"As global market volatility subsided, financial activities staged a rapid recovery beginning in early 2009," IMF stated. "Banking and insurance led the way, while brokerage and wealth management were slower in posting gains."

From a historical perspective, IMF noted, Singapore’s exit from recession has been more vigorous than those following the 2001 dot.com crash and the 1997−98 Asian crisis.

"Improved global demand and sentiment as well as strong domestic policies and resilient labor markets have limited the severity of the downturn and set the stage for the expansion underway," IMF stated.

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