The worst periods in Singapore’s economy in the past 51 years
3 Oct 2016
By John Foo
Singapore’s economic growth is losing steam, experts say.
It is worrying, although the Singapore economy has overcome many challenges and experienced rapid development since independence in 1965.
In 1965, Singapore’s nominal gross domestic product (GDP) – one of the primary indicators used to gauge the health of the economy – per capita was around US$500, which put the country at the same level as Mexico or South Africa.
Last year (2015), GDP per capita was about US$56,000 – putting us in the same league as Germany and the United States.
According to the Monetary Authority of Singapore (MAS) – the Republic’s central bank and financial regulatory body – Singapore’s strong economic performance over the years “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 high value-added products such as electronics, chemicals and biomedical, added the agency.
It has also helped with the country’s performance: over the period from 2000 to 2010, GDP nearly doubled, rising from S$163 billion to S$304 billion.
But there was gloom amid the boom in between. Given that Singapore’s economy is driven by exports, it can be hard hit by the global economic slowdown.
And it has.
For example, Singapore experienced its first recession in 1985. After that, it faced the 1997 Asian Economic Crisis, the 2001 recession (where the economy shrunk by 2 per cent that year) and the Global Financial Crisis of 2008-2009.
What happened in 1985?
In 1985, the Singapore economy went into recession. Interestingly, it was also the only time when the domestic economy contracted while the global economy was still growing.
Prior to the decline, Singapore had been enjoying GDP growth of 8.5 per cent per year.
In a speech at the Singapore Economic Review Conference last year, MAS managing director Ravi Menon said the 1985 recession “exposed structural strains in the economy, which had hitherto been masked by strong economic growth”.
By the second quarter of 1985, Singapore had posted a growth rate of -1.4 percent, which dropped to -3.5 per cent in the third quarter.
Companies went bankrupt and workers were retrenched. Eventually, Singapore’s unemployment figure rose to a high of 4.1 per cent in June 1985. The figure was only 2.9 per cent in the previous four years.
Menon added: “The 1985 recession was a significant milestone in Singapore’s development history. It led to a fundamental review of the policies and strategies that prevailed at the time.”
The most important outcomes from that period of review, which continued into the 1990s, were the structural reforms to enhance wage flexibility in the labour market; tap more decisively into regional markets for trade and outward investment; step up the pace of industrial upgrading while promoting innovation, entrepreneurship in the economy; and liberalise various services sectors such as finance, telecommunications, and utilities, added Mr Menon.
The economy recovered in mid-1986. By the second quarter of that year, Singapore posted a growth of 1.2 per cent, which increased to 3.8 per cent in the third quarter.
What caused the 1997 financial crisis?
The Asian financial crisis started with the collapse of the Thai baht in July 1997.
It escalated quickly, eventually causing a number of Asian countries to see their currencies, stock markets and other asset prices to drop in value.
In Singapore, the economy shrank by 1.4 per cent in 1998 in terms of real gross domestic product (GDP), the first decline since the 1985 recession after an average growth of 14[1] per cent per annum from 1986 to 1997.
In the last quarter of 1997, 4,280 workers were retrenched. The situation worsened in 1998, with quarterly retrenchments averaging about 7,300.
After a slew of measures introduced by the government – which were aimed at lowering business costs and providing relief to individuals and households – the economy rebounded by early 1999: The overall GDP for the whole year grew by 7.2 per cent, much higher than the government’s initial forecast of between -1 per cent and +1 per cent.
What about the other two recessions?
The year 2001 may be remembered as the year the dot-com bubble burst. It was also when the Singapore economy slipped into another recession. By December 2001, the Republic’s unemployment rate worsened to 4.7 per cent, the highest in 15 years, as companies laid off workers to weather a recession, said the Ministry of Manpower.
A total of 25,600 workers were retrenched in 2001, more than double the lay-offs in 2000.
Of the total, 15,900, or 62 per cent, came from manufacturing industries, while 9700, or 38 percent, were from the services sector.
In a speech made in 2009, Emeritus Senior Minister Goh Chok Tong said: “The dot-com bust in 2000/2001 exposed our dependence on the electronics sector. This sector contributed close to two-thirds of Singapore’s non-oil domestic exports then. We responded by diversifying our manufacturing base from electronics to other high value-added sectors like petrochemicals and pharmaceuticals. We signed free trade agreements with our major trading partners. We also promoted entrepreneurship and promising local enterprises. We grew rapidly. Other than for one quarter in 2003 when SARS scared the hell out of us, our growth was uninterrupted until this year (2009).“
He made that speech as Singapore grappled with another slowdown; the Republic officially slid into recession in October 2008 after falling consumer demand from the US and Europe affected its manufacturing exports.
The economy shrank by 6.3 per cent in the third quarter, on an annualised seasonally adjusted basis, having shrunk by 5.7 per cent in the second quarter of 2008.
To help Singapore businesses and workers cope, the government pumped in S$2.9 billion in November 2008 and a further S$20.5 billion Resilience Package in January 2009.
By August 2009, Prime Minister Lee Hsien Loong said “the worst is over for the Singapore economy”. In November that year, the Ministry of Trade and Industry declared that the recession was over.
3 Oct 2016
By John Foo
Singapore’s economic growth is losing steam, experts say.
It is worrying, although the Singapore economy has overcome many challenges and experienced rapid development since independence in 1965.
In 1965, Singapore’s nominal gross domestic product (GDP) – one of the primary indicators used to gauge the health of the economy – per capita was around US$500, which put the country at the same level as Mexico or South Africa.
Last year (2015), GDP per capita was about US$56,000 – putting us in the same league as Germany and the United States.
According to the Monetary Authority of Singapore (MAS) – the Republic’s central bank and financial regulatory body – Singapore’s strong economic performance over the years “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 high value-added products such as electronics, chemicals and biomedical, added the agency.
It has also helped with the country’s performance: over the period from 2000 to 2010, GDP nearly doubled, rising from S$163 billion to S$304 billion.
But there was gloom amid the boom in between. Given that Singapore’s economy is driven by exports, it can be hard hit by the global economic slowdown.
And it has.
For example, Singapore experienced its first recession in 1985. After that, it faced the 1997 Asian Economic Crisis, the 2001 recession (where the economy shrunk by 2 per cent that year) and the Global Financial Crisis of 2008-2009.
What happened in 1985?
In 1985, the Singapore economy went into recession. Interestingly, it was also the only time when the domestic economy contracted while the global economy was still growing.
Prior to the decline, Singapore had been enjoying GDP growth of 8.5 per cent per year.
In a speech at the Singapore Economic Review Conference last year, MAS managing director Ravi Menon said the 1985 recession “exposed structural strains in the economy, which had hitherto been masked by strong economic growth”.
By the second quarter of 1985, Singapore had posted a growth rate of -1.4 percent, which dropped to -3.5 per cent in the third quarter.
Companies went bankrupt and workers were retrenched. Eventually, Singapore’s unemployment figure rose to a high of 4.1 per cent in June 1985. The figure was only 2.9 per cent in the previous four years.
Menon added: “The 1985 recession was a significant milestone in Singapore’s development history. It led to a fundamental review of the policies and strategies that prevailed at the time.”
The most important outcomes from that period of review, which continued into the 1990s, were the structural reforms to enhance wage flexibility in the labour market; tap more decisively into regional markets for trade and outward investment; step up the pace of industrial upgrading while promoting innovation, entrepreneurship in the economy; and liberalise various services sectors such as finance, telecommunications, and utilities, added Mr Menon.
The economy recovered in mid-1986. By the second quarter of that year, Singapore posted a growth of 1.2 per cent, which increased to 3.8 per cent in the third quarter.
What caused the 1997 financial crisis?
The Asian financial crisis started with the collapse of the Thai baht in July 1997.
It escalated quickly, eventually causing a number of Asian countries to see their currencies, stock markets and other asset prices to drop in value.
In Singapore, the economy shrank by 1.4 per cent in 1998 in terms of real gross domestic product (GDP), the first decline since the 1985 recession after an average growth of 14[1] per cent per annum from 1986 to 1997.
In the last quarter of 1997, 4,280 workers were retrenched. The situation worsened in 1998, with quarterly retrenchments averaging about 7,300.
After a slew of measures introduced by the government – which were aimed at lowering business costs and providing relief to individuals and households – the economy rebounded by early 1999: The overall GDP for the whole year grew by 7.2 per cent, much higher than the government’s initial forecast of between -1 per cent and +1 per cent.
What about the other two recessions?
The year 2001 may be remembered as the year the dot-com bubble burst. It was also when the Singapore economy slipped into another recession. By December 2001, the Republic’s unemployment rate worsened to 4.7 per cent, the highest in 15 years, as companies laid off workers to weather a recession, said the Ministry of Manpower.
A total of 25,600 workers were retrenched in 2001, more than double the lay-offs in 2000.
Of the total, 15,900, or 62 per cent, came from manufacturing industries, while 9700, or 38 percent, were from the services sector.
In a speech made in 2009, Emeritus Senior Minister Goh Chok Tong said: “The dot-com bust in 2000/2001 exposed our dependence on the electronics sector. This sector contributed close to two-thirds of Singapore’s non-oil domestic exports then. We responded by diversifying our manufacturing base from electronics to other high value-added sectors like petrochemicals and pharmaceuticals. We signed free trade agreements with our major trading partners. We also promoted entrepreneurship and promising local enterprises. We grew rapidly. Other than for one quarter in 2003 when SARS scared the hell out of us, our growth was uninterrupted until this year (2009).“
He made that speech as Singapore grappled with another slowdown; the Republic officially slid into recession in October 2008 after falling consumer demand from the US and Europe affected its manufacturing exports.
The economy shrank by 6.3 per cent in the third quarter, on an annualised seasonally adjusted basis, having shrunk by 5.7 per cent in the second quarter of 2008.
To help Singapore businesses and workers cope, the government pumped in S$2.9 billion in November 2008 and a further S$20.5 billion Resilience Package in January 2009.
By August 2009, Prime Minister Lee Hsien Loong said “the worst is over for the Singapore economy”. In November that year, the Ministry of Trade and Industry declared that the recession was over.
