In this article, you will be given information about the promising industry sector in Singapore's economy growth, and it will help you to understand the sectors that drive Singapore’s economic growth!
Overview of Singapore’s Economy
The economy of Singapore is a highly developed free-market economy, as it has been ranked as the most open in the world, with low tax rates 14.2% of Gross Domestic Product (GDP), and has the third highest per-capita GDP in the world in terms of purchasing power parity.
According to the Singapore Department of Statistics (DOB), in 2019, the GDP in Singapore was S$507.568 million at the current market price. Its real GDP growth rate was 0.7%
Additionally, Singapore’s economy succeeded in preventing a technical recession in the third quarter with full-year growth coming at the lower end of the $0.5% to 1% growth forecast. However, the country has one of the biggest challenges that could take a toll on the island nation’s economy in 2020, and it is climate change.
According to the news, Prime Minister Lee Hsien Loong had already warned the economy might need close to $100 billion, to counter the effects of climate change. Many predicted that Singapore’s economy in 2020 could also come under pressure from rising U.S - China tensions beyond trade as well as China's economic slowdown connected by other geopolitical hotspots.
Other than that, the coronavirus might also slow Singapore's economy. The impact of COVID-19, initially on selected sectors, has been swift. This prompted the government to draw up an unprecedented combination of 4 budgets, such as wage subsidies, tax rebates and rent relief to give companies and workers more help for a longer period. These added up to almost S$100 billion.
Despite these situations, there are a number of sectors that look set to outperform in a favourable economic environment. The services sectors look set to be at the forefront of driving Singapore’s economic growth. However, the manufacturing sector is also expected to do so.
The Promising Industry Sectors That Will Help Singapore’s Economy Growth
1. Services Sector
Back in 2019, Finance and Insurance Services was one of the most important sectors in Singapore's economy. It was the largest FDI sector and the 4th largest sector in terms of GDP. This meant, the sector was not only big, but it was growing fast too.
According to UOB Economics and Market Research, the services sector will be at the center of Singapore 2020 economic growth. Finance and Insurance segments will be some of the key drivers on the front.
In this sector, there are some local banks in Singapore that have become leading banks in the world. They are DBS, United Overseas Bank (UOB), and OCBC Bank. There are also well-known fintech, such as Validus Capital, Aspire, and StashAway.
Moreover, Singapore has established itself as a reputable financial center that offers access to both the local economy and the Asia Pacific region. Singapore also has become home to over 1.200 financial institutions that provide the products and services across multiple asset classes.
According to the Singapore Department of Statistics (DOS), the Financial and Insurance services sector claimed the 1st spot in terms of FDI volume S$927.890 million in 2018. It accounted for 53.45% of the total FDI value.
In addition, Singapore has created an efficient pro-business environment, well-developed infrastructure, highly skilled, and experienced finance professionals. The Monetary Authority of Singapore (MAS) follows international standards and best practices, which helps to earn investor confidence in the Singapore financial system.
2. Manufacturing
According to the Singapore Department of Statistics (DOS), the Manufacturing sector represented 20.9% of the total GDP in 2019. This was the largest sector in 2019, and it was equivalent to S$106.1 billion. Some of the biggest names in the world, especially in this sector have set up innovative manufacturing centers in Singapore. They are ABB, Accenture, Siemens, and Dyson.
The Singaporean government has always invested and focused on the manufacturing sector. The government also built several science parks dedicated to aerospace, electronics, biomedical sciences, and precision engineering.
The country is the world’s 5th largest refinery export hub and amongst the top 10 global chemical hubs by export volume. Singapore is also the 4th largest global exporter of high tech products.
Singapore has committed to invest S$3.2 billion in R&D in Advanced Manufacturing and Engineering, to build up the innovation capacity of companies. Not only that, Singapore also developed a nationwide series of modular courses to help workers obtain the necessary skills to take on jobs in advanced manufacturing.
3. Wholesale and Retail Trade
According to the Singapore Department of Statistics (DOS), the Wholesale and Retail Trade ranked 2nd with S$272.010 million in 2018. It accounted for 15.7% of the total FDI value. The FDI flows into this sector had varied from 2014 until 2018. Since 2016, it has displayed a downward trend. It decreased by 3% compared to 2017 and 8% compared to 2016.
Wholesale and Retail Trade claimed the 2nd spot as it represented 17.3% of the total GDP in 2018, and it was equivalent to S$87.8 billion. There are popular wholesale companies in the country, such as Luxiasia and Olam. In addition, many home-grown retail companies in the country have become leading retail names in Singapore and Asia. They are Metro Holdings, OSIM, and The Hour Class Limited.
The sector has a great potential to drive the economy, and that is why the government has established many initiatives which target trading companies. For example, the Global Trader Program, which is the longest-standing program of its kind. The big and medium-sized international firms can join the program if they set up operations in Singapore. The program provides a corporate tax reduction around 5% or 10% for the period of 3 - 5 years for the wholesale traders.
This sector has become one of the largest sectors in Singapore because it has the benefits of a strategic location. To be clearer, it is situated in the middle of some primary sea lanes in Asia which facilitate import and export among Asian countries, such as China, India, Malaysia, and Indonesia. The other reason is, the Singaporean government has several policies to encourage free trade and a stable trading environment.
4. Technology
The Association of Southeast Asian Nations is on track to become the 4th largest market in the world. Singapore’s tech industry continues to grow at an impressive rate and is proposed to be a key driver of the economy as it continues to enable almost every industry.
For instance, the internet economy grew at an average of 20% until 30% annually. Additionally, Singapore is already home to 80 of the world’s top 100 tech firms. The companies such as Google, Linkedin, Huawei Baidu, and NVIDIA have already set up in the country, and they are creating thousands of jobs for locals.
In the end, those tech companies have given rise to new opportunities that should continue to drive the country’s economy. Also, it has increased investments in Artificial Intelligence, Virtual Reality, as well as blockchain, and should be at the forefront of the economic growth in the tech industry.
Singapore has experienced a roller-coaster ride in 2019 due to uncertainty in the financial markets as well as the global economy, and followed by the outbreak in 2020 that hit around the world. However, these are the 4 top sectors that expected to drive the country’s economy throughout the year and also next year. Hopefully, Singapore’s economy will rise once again and finally, these sectors are growing more in the future! If you have any difficulties when expanding your business in Singapore, you can contact Viettonkin Consulting anytime!
