BOOM AND BUST SINGAPORE IN THE 2000S AFTER THE ASIAN ECONOMIC CRISIS
Singapore’s economy boomed for a little while after the Asian economic crisis then slumped again. Growth was 9.5 percent in 2000. During a recession in 2001 GDP shrank 2.4 percent and Singapore struggled through one of its worst economic slumps ever.
Singapore was hit hard by the dot.com bust and the decline in the electronic and computer chip industries. The value of the Singapore dollar fell. Singapore posted negative growth rates in 2001 when the bust was at its peak. Afterwards there was a slight recovery. Growth in 2002 was 2.5 percent.
Growth in 2003 was slowed by SARS, which did number on tourism and business in general in Singapore. In the second quarter of 2003, when the SAS outbreak was at its peak, the Singaporean economy shrank 11.8 percent, the biggest contraction ever in Singapore. Growth in 2004 was 8.5 percent. But not many new jobs were created. The growth was lead by an increase in exports of computer chips and pharmaceuticals. Growth was 5.2 percent in 2005. That year exports accounted for 80 percent of GDP. Growth was 7.9 percent in 2006 and 7.7 percent in 2007. Inflation was 2.1 percent in 2007. Inflation reached 7.5 percent in June 2008, a 26-year high. Higher oil prices and food prices were mostly to blame.
Singapore Posts 7.7 Percent Growth in 2006
Singapore's economy grew 7.9 percent in 2006, one of the highest growth rates in Asia. John Jannarone wrote in the Wall Street Journal, Singapore's manufacturing sector grew 7.3 percent in the fourth quarter from a year earlier, slowing from 9.5 percent growth in the third quarter. The slower pace of growth reflected weaker chemicals and electronics output, offset partially by sustained expansion in the biomedical and transport-engineering sectors, the government said. [Source: John Jannarone, Wall Street Journal, January 4, 2007 ==]
“Services expanded 6 percent in the fourth quarter from a year earlier, slower than the 6.6 percent growth rate in the prior quarter. Reflecting the impact of softer external demand, growth slowed in the trade sector, but hotels, restaurants, and financial services accelerated.The construction industry grew 2.4 percent from a year earlier in the fourth quarter, similar to the third quarter's 2.6 percent growth. ==
“In his annual New Year's message Sunday, Prime Minister Lee Hsien Loong underscored that Singapore's economy remains healthy but is at risk from a slowdown in the world economy. Mr. Lee affirmed the government's target for growth between 4 percent and 6 percent this year, and economists say the rate is achievable.” ==
Singapore's Jobless Rate Falls to a 10-Year Low in 2007
In September 2007, Singapore's unemployment rate fell to a seasonally-adjusted 1.7 percent, a decade low, as the economy maintained its rapid expansion. CNA reported: “The economy created 57,600 jobs in the third quarter of this year, bringing the total employment gains for the first three quarters of 2007 to 171,500, which is close to the 176,000 for the whole of last year. Amid the strong job creation, the seasonally-adjusted overall jobless rate fell to 1.7 percent in September 2007 from 2.3 percent in June 2007. Compared to a year ago, the jobless rate has fallen by a full percentage point from 2.7 percent in September 2006. "The prevailing unemployment rate is the lowest in a decade, having improved to around pre-Asian crisis levels," said the Ministry of Manpower (MOM) in a statement on Wednesday, referring to the regional financial meltdown in 1997. [Source: CNA, October 2007 >>>]
“The number of jobs created in the third quarter is substantially higher than the increase of 43,000 in the same quarter last year but lower than the record gains of 64,400 in the previous quarter. Services continued to lead the employment gains, adding 34,500 workers in the third quarter of 2007. The manufacturing sector posted gains of 11,800. Driven by the growth in building activities, construction increased its workforce by 10,800, continuing the rapid increase of the previous quarter. >>>
“On retrenchment, the MOM report said initial findings showed that 1,700 workers were laid off in the third quarter of 2007. The majority of the workers retrenched were from manufacturing (1,200). Another 500 workers laid off were from the services industries. Among Singapore citizens and permanent residents, the resident unemployment rate fell significantly to 2.3 percent in September 2007 from 3.1 percent in June 2007 and 3.6 percent in September 2006. >>>
“The sharp improvement in unemployment rate partly reflected an easing in the increase in resident labour supply over the past two quarters, following rapid gains in residents entering the labour market in 2005 and 2006. On a non-seasonally adjusted basis, the overall jobless rate fell from 2.9 percent in June 2007 to 1.5 percent in September 2007 when this year's batch of tertiary graduates who were looking for jobs in the earlier quarter secured employment. >>>
Impact of the 2008-2009 Global Financial Crisis on Singapore
The global financial crisis of 2008-2009 took a toll on Singapore's export dependent economy, reducing annual economic growth to just 1.1 percent in 2008, compared to around 8.2 percent between 2004-2007, and creating the highest unemployment rate in five years. The Government of Singapore Investment Corp (GIC), one of the world's largest sovereign wealth funds, invested billions of dollars in global financial institutions that have fallen victim to the international crisis. Strengthening ties was China seen as way as mitigating Singapore's risk.
Singapore's trade-reliant economy was the first in Asia to slip into recession (in the third quarter of 2008) after the fall of US investment bank Lehman Brothers sparked a crisis that led to a collapse in global consumption. The Singapore economy shrank 2.1 percent in 2009 but this was less than originally feared. Singapore's worst recession on record is the 2.4 percent contraction in its GDP following the collapse of the technology bubble in 2001.
In March 2009, Anthony Faiola wrote in the Washington Post, “With world trade plummeting for the first time since 1982, the long-bustling port has become a maritime parking lot in recent weeks, with rows of idled freighters from Asia, Europe, the United States, South America, Africa and the Middle East stretching for miles along the coast. "We're running out of space to park them," said Ron Widdows, chief executive of Singapore-based NOL, one of the world's largest container lines. [Source: Anthony Faiola, Washington Post, March 5, 2009 <>]
“Thousands of foreign workers, including London School of Economics graduates with six-digit salaries and desperately poor Bangladeshi factory workers, are streaming home as the economy here suffers the worst of the recessions in Southeast Asia. Singapore is an epicenter of what analysts call a new flow of reverse migration away from hard-hit, globalized economies, including Dubai and Britain, that were once beacons for foreign labor. Economists from Credit Suisse predict an exodus of 200,000 foreigners -- or one in every 15 workers here -- by the end of 2010. <>
“Singapore's exports collapsed by a stunning 35 percent in January, mirroring much of the rest of Asia. The export boom here was tied to credit-fueled buying sprees in the United States that stopped abruptly and may take years to return, if ever. Manufacturers are grasping for a Plan B. But none of the options -- mining domestic markets, or trying to tap consumers in still-growing China and India -- offers a truly viable solution. Adding to fears of a years-long depression for exports is a rising tide of trade protectionism in countries including neighboring Indonesia. <>
“Unlike Dubai, where the zeal to build bigger and higher overtook its ability to cover the costs when the global economy went bust, Singapore's more conservative approach toward spending and construction has left it flush with cash. Much of that cash is managed by Temasek, Singapore's sovereign wealth fund and a major player in global investment in recent years. It emerged as a white knight for cash-starved companies in the West and East, buying into everything from Merrill Lynch to Thai cellphone companies. But Temasek, like most sovereign wealth funds in China and the Middle East, is now sitting on the sidelines as the global economy burns. <>
It is easy to see why. Spiraling global losses cost Temasek 31 percent of its book value -- $39 billion -- from March through November of last year. Losses have mounted further since then, analysts say. "They have invested so much in Citibank, in Merrill Lynch, and they've been burned," said Peter Gontha, a Jakarta industrialist. "They are going to be more cautious, more reluctant from now on." Meanwhile, the government is tapping reserves to prop up the domestic economy, offering companies cash payouts amounting to 12 percent of workers' salaries to stem a tide of layoffs. Singapore's finance minister, Tharman Shanmugaratnam, however, said that while globalization may be going through a bad patch, it remains the only long-term option for nations as globalized as his. "This is clearly not going to be a short period of adjustment . . . but globalization is not a bad strategy," he said. "It just takes patience during times like these." <>
Singapore Investors Suffer Losses from Lehman Bonds and AIG Policies
In October 2008, Associated Press reported: “ Hundreds of distraught Singaporean investors flooded a park to express their anguish at losses from structured notes issued by Lehman Brothers Holdings Inc. that they say were sold to them by banks as safe investments. Among the crowd that gathered were retired, middle class and working class investors who told a similar story. During the past few years as their other fixed-income instruments matured local bank officials pushed a 5 to 7-year bond that would yield about 5 percent, higher than the 0.5 percent interest rate banks pay on checking or savings account deposits. [Source: AP, October 12, 2008 +^+]
"This wasn't some pyramid scheme, or so we were led to believe,'' said Lawrence Chin, a 62-year-old retired salesman who invested 50,000 Singapore dollars (US$33,760) in the bonds in 2006. "Now they say they're toxic. I never knew a bond could be toxic,'' said Chin. Small investors such as Chin are bearing part of the destruction wrought by a credit crisis that began last year with U.S. sub-prime mortgages and has since engulfed markets around the world. Investment bank giant Lehman declared bankruptcy.” +^+
“The central bank, known as the Monetary Authority of Singapore, said about 8,000 people bought S$508 million (US$343 million) of Lehman-linked structured notes from nine banks and brokerages. "I'm afraid I could lose all my money,'' said taxi driver Tan Weng Yeow, 60. "I invested S$10,000 (US$6,752), which is a lot for someone like me. I'm really upset. I want the government or the bank to give me back some of my money.'' +^+
“Singaporean investors met in a park known as Speakers' Corner, the only outdoor space where the government allows limited protests and public gatherings. Protests are very rare in Singapore, as the government enforces strict rules against public assembly and criticism. "I came down here because I really don't know what to do and I wanted to talk to other people in my same situation,'' said a 45-year-old engineer who would only gave her surname of Lim. "I invested S$70,000 (US$47,265) and now my daughter is asking me if she can still go to university. It's terrible.'' +^+
A month or so earlier, Associated Press reported: “Hundreds of worried policyholders thronged Asian offices of troubled global insurance giant American International Group (AIG), some hoping to terminate their agreements. In Singapore, hundreds lined up outside the company's local headquarters. Pentja, an Indonesian, said he had flown from Jakarta and gone immediately to queue outside the Singapore offices of AIG and its wholly-owned subsidiary American International Assurance Company Limited (AIA). He said he knew about the US rescue plan for AIG but wanted to terminate his three policies anyway. "I prefer to take out the money. I don't mind the loss," he said. [Source: AFP, September 17, 2008 \~\]
Karen Choo, of Singapore, was also insistent on withdrawing her funds. "I don't feel confident. I'd rather take the money out and invest elsewhere," said Choo, who took the day off work to join the queue, which stretched around the office tower in Singapore's financial heart. Choo said she had two policies worth about 100,000 Singapore dollars (70,000 US). "It's such a big insurance company. Who would have thought? We still want to go ahead to surrender our policy. At least we get back some of the money," said another woman, who gave her name only as Lim. \~\
“AIA Singapore says it has more than sufficient capital and reserves to meet obligations to policyholders. It said the funds maintained in Singapore are segregated from AIG. Singapore's de facto central bank, the Monetary Authority of Singapore, cautioned policyholders against the hasty termination of their policies. But some still wanted answers. By late afternoon, the Singapore office could not handle any more queries and asked hundreds of customers to come back on Thursday.” \~\
Singapore to Guarantee All Bank Deposits till End-2010
In October 2008, the Singaporean government said it would set aside S$150 billion dollars (US$101 billion) to guarantee all bank deposits in the city-state until the end of 2010 while insisting the banking system in the city state was sound. AFP reported: “Authorities said they had taken the move -- which followed similar action in Australia, Hong Kong, New Zealand and several European countries -- to "ensure a level international playing field" for local banks. The government will "guarantee all Singapore dollar and foreign currency deposits of individual and non-bank customers in banks, finance companies and merchant banks licensed by the MAS," the Monetary Authority of Singapore (MAS) and the finance ministry said in a joint statement. They said the guarantee would take immediate effect and will remain in place until December 31, 2010. [Source: AFP, October 16, 2008 \^/]
“Since Singapore's financial sector is "sound and robust", authorities determined a guarantee of up to 150 billion dollars "will be well in excess of possible liabilities arising from the failure of any financial institutions." Under an existing scheme, deposits were ensured for up to 20,000 dollars. "The announcement by a few jurisdictions in the region of government guarantees for bank deposits has set off a dynamic that puts pressure on other jurisdictions to respond or else risk disadvantaging and potentially weakening their own financial institutions and financial sectors," the Singapore statement said. "The government has decided to take precautionary action to avoid an erosion of banks' deposit base and ensure a level international playing field for banks in Singapore."\^/
“Authorities around the world have been scrambling to shore up public confidence in the global financial system by nationalising banks, guaranteeing deposits and putting together massive bank bailout packages. The United States has a 700 billion dollar rescue plan, and the Bush administration announced that 250 billion dollars from that would be used to take stakes in nine major banks. "Singapore has not had to undertake similar extraordinary measures, in view of the continuing stability and orderly functioning of the Singapore banking system," the statement said. \^/
Singapore Economy Plummets and Unemployment Rises in 2009
Singapore's export-dependent economy plummeted nearly 20 percent in the first quarter of 2009, its biggest contraction ever, a the height of the global economic crisis. Associated Press reported: “Gross domestic product in this wealthy Southeast Asian city-state plunged an annualized, seasonally adjusted 19.7 percent in the first quarter from the previous quarter and fell 11.5 percent from a year earlier, both record drops, the Trade and Industry Ministry said Tuesday. [Source: Associated Press, April 14 2009 |=|]
“Singapore announced a $14 billion stimulus package in January 2009."We believe we are facing a Great Recession, but we are not going into a Great Depression," Hui said. "We still expect to see some signs of stabilization at the end of 2009, although admittedly mild." The island's economy has already contracted quarter-on-quarter over four consecutive quarters. The city-state's central bank, known as the Monetary Authority of Singapore, said it lowered the center of its currency trading band, which was effectively a small, one-time devaluation of the Singapore dollar. But it said there was no reason for "any undue weakening" of the Singapore dollar. Standard Chartered's Hui estimated the devaluation at 1.5 percent. |=|
“Manufacturing fell 29 percent in the first quarter from a year earlier while services fell 5.9 percent. Construction rose 26 percent. "Manufacturing was dragged down by the biggest, most synchronized collapse in world trade since the 1930s, which in turn has had some knock on consequences for services," said Robert Prior-Wandesforde, senior Asia economist for HSBC in Singapore. Imports fell 28 percent last month from a year earlier and dropped a seasonally adjusted 4.7 percent from the previous month, the ministry said. Singapore's first quarter GDP results are preliminary and based largely on economic activity in January and February. The government forecast economic growth of as much as 2 percent for this year in an initial forecast in November. “ |=|
Singapore's key exports plunged 24 percent in February, 2009. AFP reported: “It was the 10th straight month of decline in key non-oil domestic exports, following a record 35 percent drop in January, according to government figures. Total trade in February fell 22.1 percent to almost 54 billion Singapore dollars (35 billion US) as shipments to the city-state's top 10 markets, except China, were down, according to the monthly data. [Source: AFP, March 17, 2009 +++]
“Demand from the recession-hit US shrank the most as shipments fell 44.4 percent to 1.03 billion dollars, following a 50 percent decline in January. Shipments to the European Union skidded 36.7 percent to 1.4 billion dollars, while exports to Japan plummeted 38.9 percent to 581 million dollars, IE Singapore said. Overall electronics exports dropped 31.9 percent to 3.5 billion dollars, pharmaceuticals fell 23.4 percent to 1.3 billion dollars while petrochemicals declined 42.6 percent to 562 million dollars, IE Singapore said. |=|
The number of jobless Singaporeans jumped in the first quarter to its highest since 2005 as the global trade slump triggered manufacturing layoffs. Associated Press reported: “The unemployment rate rose to a seasonally adjusted 3.2 percent in March from 2.5 percent in December and 1.9 percent in March 2008, Singapore's Manpower Ministry said. The manufacturing sector lost 19,900 jobs in the first three months of the year, up from 7,000 jobs lost in the fourth quarter, the ministry said. The global recession has hurt Singapore's most important industries of trade, finance and tourism. The economy contracted 11.5 percent in the first quarter from a year earlier, the biggest drop since independence from Malaysia in 1965. The government’s $13 billion stimulus package included a company subsidy for 12 percent of the first $1,662 of every employee's monthly wages, which has helped to keep joblessness from surging even higher, Kit Wei Zheng, an analyst with Citigroup in Singapore, told AP. [Source: AP, April 30, 2009]
Lifestyle Changes in Singapore During the 2008-2009 Global Financial Crisis
In December 2008, Asian News Network reported: “A Singapore sculpture dealer said he only sold a 30,000-yuan (US$4,360) piece during an exhibition, although many people had inquired about its goods. “Although the situation for the domestic market is still not clear, luxury consumption will certainly be affected by the global economic crisis,” said Liu Zheng, an analyst of the luxury goods industry. [Source: Asian News Network, December 27, 2008 *+*]
“Aside from not buying luxury items, people are also letting go of some of their precious possessions. A banker, who wanted to be known only as John, trudged into a secondhand watch shop in Singapore recently carrying a prized US$2,664 Gerald Genta timepiece. There, the young man, his yearend bonus under siege from Singapore”s economic slowdown, sold the watch for a song. It was the third time in two months that John, who is in his 30s, had been forced to part with a timepiece from his five-watch collection, which had cost him more than US$13,317. “In these times, you start getting rid of things in surplus and keep only those things you really need,” he said. John is among a growing number of high-fliers who are unloading their luxury watches for cash as Singapore”s economy enters its first recession in six years. Secondhand watch shops have been flooded with brands ranging from Rolex to the ultra-high-end Patek Philippe as bankers, stockbrokers and other battered business heavyweights face stark financial choices. *+*
“Economists say this is one of the first signs that Singapore”s upper crust is feeling the pinch of the economic downturn, which has already forced lower-income families to tighten their belts. “It is symptomatic of white-collar stress and definitely means things are more widespread than before,” said Barclays Capital economist Leong Wai Ho. “People are getting rid of luxuries they don”t need.” *+*
Singapore After the 2008-2009 Global Financial Crisis
In 2012 Lee Hsien Loong the Washington Post: We are accepting a lower growth because we can’t just expand our workforce without limit and constraint. In the final quarter of 2009, Singapore's economy shrank 6.8 percent but the slowdown was less than expected for the whole year, the trade ministry said. Associated Press reported: “The decline in gross domestic product (GDP) was attributed to weakness in the key manufacturing sector, which shrank 38.4 percent on a seasonally adjusted quarter-on-quarter annualised basis, it said. The slide in manufacturing, a dramatic reverse from the 29.6 percent growth of the third quarter, was mainly due to a fall in output from pharmaceuticals and transport engineering, the ministry said, releasing preliminary estimates. "However, the electronics, chemicals and precision engineering clusters posted positive growth," it said in a statement. [Source: AP, January 4, 2010]
The government declared the recession over in November, 2009 but cautioned that the strength of its recovery will depend on the pace of rebound in Singapore's major trading partners such as the United States, the European Union and Japan. With the economy contracting less than feared, Singapore escaped what could have been its worst recession since independence in 1965, thanks in part to a S$20.5 billion Singapore dollar government stimulus package.
Singapore's GDP soared 32 percent in first quarter of 2010 and was 14.8 percent for all of 2010. Associated Press reported: “Singapore says its economy soared in the first three months of 2010 as manufacturing more than doubled. The Trade and Industry Ministry said Wednesday that gross domestic product grew an annualized, seasonally adjusted 32.1 percent in the first quarter. , bouncing back from a 2.8 percent drop in the fourth quarter of 2009. The central bank says that it shifted its exchange rate policy from a 0 percent appreciation to a "modest and gradual" appreciation in a bid to dampen inflation pressure. [Source: Associated Press, April 14 2010]
Growth was 5.2 percent in 2011 and 1.3 percent in 2012. AFP reported: “Growth in Singapore's trade-reliant economy slowed down sharply in 2012 as exports tumbled due to a global economic slump, according to the latest official data. The key manufacturing sector bore the brunt of the slowdown, as global demand for electronics goods softened. [Source: AFP, February 22, 2013]
"For the whole of 2012, Singapore's GDP (gross domestic product) growth slowed to 1.3 percent, from 5.2 percent in 2011, mainly due to weakness in the externally-oriented sectors," the trade ministry said in a statement. "Weighed down by the contraction in the electronics cluster, (the) manufacturing sector growth slowed sharply from 7.8 percent in the previous year to 0.1 percent." Electronics shrank by 11.3 percent in 2012, faring the worst out of Singapore's six major manufacturing clusters. Overall GDP was supported by a buoyant construction sector which grew 8.2 percent, the ministry said. Services rose 1.2 percent.
Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Singapore Tourism Board, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.
© 2008 Jeffrey Hays
Last updated June 2015