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Singapore: Highly Dependent on International Trade

Key Information
CapitalSingapore City
Population5.8 million
CurrencySingapore Dollar
Official language(s)Mandarin, English, Malay and Tamil
Form of governmentParliamentary Democracy

 

Major Merchandise Exports (% of total, 2017)Major Merchandise Imports (% of total, 2017)
Machinery & transport equipment (49.0%)Machinery & transport equipment (45.9%)
Mineral fuels (17.5%)Mineral fuels (22.1%)
Chemicals products (13.6%)Miscellaneous manufactured articles (8.2%)
Top Three Export Countries (% of total, 2017)Top Three Import Countries (% of total, 2017)
China (14.4%)China (13.8%)
Hong Kong (12.3%)Malaysia (11.9%)
Malaysia (10.6%)US (10.6%)

Source: Economist Intelligence Unit, the World Factbook

Political Highlights

Singapore is parliamentary democracy, with an elective, non-executive presidency. The Prime Minister Lee Hsien Loong is the leader of the majority People's Action Party (PAP) in parliament. The governing PAP has been in power since 1959 and is forecast to remain in office following the next parliamentary general election in 2021. The president, PAP-endorsed candidate Halimah Yacob, was elected for a six-year term in September 2017.

Singapore maintains close ties with its close neighbors Malaysia and Indonesia which has been strengthened in recent years by projects such as the high-speed rail link and on issues of mutual concern such as anti-terrorism. The country’s membership of regional trade pacts including the Comprehensive and Progressive Partnership for Trans-Pacific Partnership (CPTPP) will also prove essential to its long-term economic prospects. Furthermore, Singapore is EU's largest commercial partner in ASEAN, accounting for around one-third of EU-ASEAN trade in goods and services, and roughly two-thirds of investments between the two regions. In October 2014, a free trade agreement (the “EUSFTA”) was signed between Singapore and the European Union (EU) and is expected coming into force by the end of 2019. EUSFTA is the first deal between the EU and a South-East Asian economy which paves the way for greater engagement between the two regions.

Economic Trend

Economic Indicators2015
2016
2017
2018*
2019*
Nominal GDP (USD bn)304.1309.8323.9351.3374.8
Real GDP growth (%)2.22.43.63.22.9
GDP per capita (USD)54,94055,24057,71060,64063,870
Inflation (%)-0.5-0.50.60.61.0
Budget balance (% of GDP)0.6-1.2-0.3-0.7-0.5
Current account balance (% of GDP)18.619.018.817.218.5
External debt (% of GDP)163.1176.4174.8166.9159.3

* Forecasts
Source: Economist Intelligence Unit

Singapore’s highly developed free-market economy owes its success in large measure to its remarkably open and corruption-free business environment, prudent monetary and fiscal policies, and a transparent legal framework. Its strategic location between the East and West make it one of the world’s top transportation hubs for sea and air cargo. It is also the second freest economy behind Hong Kong according to the 2018 Index of Economic Freedom.

The country is highly dependent on international trade which represented 318% of the GDP in 2016 according to the WTO. The economy performed better than expected in 2017 with a GDP growth of 3.6% driven by stronger external demand particularly in semiconductor exports. The highly open economy leaves it vulnerable to external shocks. However, its high current account surplus provides an ample buffer against capital flow volatility. For 2018, economic growth is expected to slow down to 3.0% owing to expected slower economic expansion of its trading partner China.

In April 2018, Standard & Poor's affirmed the country’s “AAA” long-term credit rating and the rating outlook was stable. The affirmation primarily reflects the country’s strong external position, continued political stability, credible monetary policy and sound fiscal framework.

Chart: Hong Kong total exports to Singapore
Chart: Hong Kong total exports to Singapore

Hong Kong-Singapore Trade

Total exports from Hong Kong to Singapore decreased by 0.4% from HK$ 61,285 million in 2016 to HK$ 61,023 million in 2017. The top three export categories to Singapore were: (1) Electrical machinery, apparatus and appliances, and electrical parts (+17.2%), (2) telecommunications and sound recording and reproducing apparatus and equipment (+2.5%), and (3) office machines and automatic data processing machines (-13.2%), which represented 61.5% of total exports to Singapore.

HKECIC Underwriting Experience

HKECIC imposes no restrictions on covering Singaporean buyers. Currently, the insured buyers in Singapore range from small and medium sized companies to listed companies. The Corporation’s underwriting experience on Singapore has been satisfactory, with no claim payment or payment difficulty case reported from August 2017 to July 2018.

Content provided by Picture: Hong Kong Export Credit Insurance Corporation
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