SINGAPORE

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SINGAPORE
Impact of the Asian Financial Crisis and Policy
Responses MAS Seminar for Pre-University
Economics Teachers, 22 Sep 1999 Economics
Department Monetary Authority of Singapore
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Outline of Presentation

• Singapores Macroeconomic Fundamentals
• Impact of the Asian Financial Crisis
• Policy Responses to the Crisis
• Long-Term Strategy

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Sound Macroeconomics Fundamentals

• Consistent budget surplus
• Current account surplus
• Strong foreign reserves position
• Stable and consistent macroeconomic policies
• Sound and robust financial system

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Spread of the Asian Financial Crisis

• Monsoonal Effect
• common causes
• Spillover Effect
• trade and capital market linkages
• Contagion Effect
• effect not explained by differences in
  macroeconomic fundamentals

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How was Singapore Affected?

• Contagion effect via the financial markets
• Spillover effect via trade and economic linkages

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Impact of the Asian Financial Crisis on Singapore
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Impact of Asian Financial Crisis
Real Economy
Financial Markets
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Impact of Asian Financial Crisis
Financial Markets
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US Bilateral Exchange Rates
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Interest Rates
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Equity Prices
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GDP Expenditure by Components
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GDP Expenditure by Components
Total Demand C G I X
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GDP by Industry Sectors (1997)
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GDP by Industry Sectors (1997)
Key Services Sectors 56
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Manufacturing Sector (1997)
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Domestic Exports by Commodity (1997)
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Non-Oil Domestic Exports by Region (1997)
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Trends in Real GDP Growth
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Growth By Sectors
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Key Services Sectors
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Manufacturing Sector
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Aggregate Demand
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External Demand
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Domestic Demand
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CPI Inflation
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Labour Market
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Business Cycles in Singapore
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Policy Responses to the Asian Financial Crisis
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Exchange Rate Policy

• Wider exchange rate policy band
• More flexible management of S exchange rate
• Balance against need to maintain confidence in
  the S
• Eased exchange rate policy

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Fiscal Policy
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Domestic Cost Adjustment

• Jun 98 2 bln off-budget package
• Reduce business costs
• Strengthen economic infrastructure
• Stabilise specific sectors of the economy

• Nov 98 10.5 bln cost-cutting package
• Reduce overall business costs by 15

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Key Cost Cutting Measures

• 10 point reduction in employers CPF
  contribution
• 10 corporate tax rebate
• Property tax rebates
• Rebates on rentals and port-related tariffs
• Rebates on telecommunications and utilities
  charges
• Cut in foreign worker levy

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Cost Indicators
Wages
Unit Labour Cost of Overall Economy
Unit Business Cost of Manufacturing
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Other Measures
Strengthen Economic Infrastructure
Enhance Access to Working Capital
Seek New Export Markets
Sector Specific Measures
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Sector Specific Measures

• Property market
• E.g. suspension of land sales, suspension of
  penalty for delaying project completion

• Financial Sector
• Tax deduction for bank provisions
• Suspend stamp duty on contract notes for share
  transactions

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Fiscal Balance
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Long-Term Strategies to Improve Singapores
Competitiveness
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Economic Blueprints
1985 Economic Committee The Singapore Economy
New Directions
1991 Economic Planning Committee Strategic
Economic Plan -- Towards A Developed Nation
1998 Committee on Singapores Competitiveness
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Committee on Singapores Competitiveness (CSC)
To become an advanced and globally competitive
knowledge economy within the next decade, with
manufacturing and services as twin engines of
growth
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Knowledge Economy
Technological Capability
Entrepeurship Innovation
Knowledge Economy
Develop Domestic Manpower
Foreign Talent
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Outlook for the Singapore Economy
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Real GDP Growth
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Investment Commitments
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Singapore Ranked in 1999

• Most Competitive Economy - World Economic Forum
  (WEF)
• Second Most Competitive Economy in the World -
  International Institute of Management Development
  (IMD)
• Top Business Environment in Asia - Economist
  Intelligent Unit (EIU)
• Second Most Favoured Asian City for Expatriate
  Living - Political Economic Risk Consultancy
  (PERC)

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THANK YOU