Singapore: Economic and Political Overview

Economic Overview

Singapore's economy is characterised by excellent finances and a high degree of openness, with the country being highly dependent on international trade. According to preliminary data, after growing by 3.6% in 2022, Singapore's economy expanded by 1.2% last year, managing to steer clear of a recession despite the global economic slowdown attributed to elevated interest rates. Singapore's aviation and tourism-related sectors also saw positive outcomes due to a rebound in visitor arrivals. On the other hand, the export-oriented manufacturing sector, especially the electronics industry, encountered reduced demand from significant trading partners, although it started to register growth in the final quarter. The Ministry of Trade and Industry anticipates Singapore's growth for 2024 to fall within the range of 1% to 3%, foreseeing a potential recovery in semiconductors and other export sectors (+2.1% according to the IMF forecast).

In recent years, government expenditure has remained hefty, driven by increased development spending, particularly in areas such as transport infrastructure, healthcare, and the environment. Additionally, support measures were introduced to assist households and businesses in dealing with the challenges posed by high inflation. Nevertheless, the government budget returned to positive territory in 2023, at 0.7% of GDP (from -1.3% one year earlier – IMF). In 2024, a one-percentage-point rise in the Goods and Services Tax (from 8% to 9%) and accelerated economic growth are projected to contribute to an increase in tax receipts. Although the recorded public debt appears elevated on paper, at 167.9% of GDP in 2023, it primarily serves the purpose of establishing a domestic safe asset market. This debt is predominantly comprised of long-term bonds and securities. Furthermore, substantial reserves accumulated from prior fiscal surpluses (ranging from 200-300% of GDP) are available to address infrequent budget deficits when necessary. Meanwhile, inflation remained elevated in 2023, at 5.5%, but is expected to follow a downward trend over the forecast horizon (3.5% this year and 2.5% in 2025) amid a tight fiscal policy.

Although per capita wealth in Singapore is amongst the highest in the region, unemployment has appeared due to structural economic changes (outsourcing of low-skilled work) and the COVID-19 crisis. However, the labour market continued to expand for the ninth straight quarter at the end of 2023, with increases for both residents and non-residents. The country has one of the highest GDP per capita in the world, estimated at USD 133,108 in 2023 by the IMF (PPP). Social challenges include rising income inequality and social discontent caused by overpopulation, high competition for employment and housing, lack of skilled labour, an ageing population, and distrust towards immigration.

Main Sectors of Industry

Singapore's economy is based on electronics, petrochemicals, trade, finance, and business services. The agricultural sector is almost non-existent except for cultivation of orchids, vegetables and fish for aquariums. Its contribution to GDP (close to 0%) and employment (close to 0%) is negligible (World Bank, 2023), although the country intends to increase food resilience by developing a new aquaculture centre. Approximately one per cent of Singapore's total land area is dedicated to agricultural activities. The agri-food sector primarily focuses on producing eggs, seafood, and vegetables to meet local consumption needs. The industry comprises 150 land-based food farms and 110 sea-based farms. Singapore does not have mineral resources.

Singapore's economy is highly industrialised. The industrial sector represents 24.9% of GDP and employs over 15% of the active population (World Bank, 2023). Electronics and petrochemicals dominate the industry, which also includes biomedical sciences, logistics, and transport engineering. Electronics is Singapore's largest manufacturing industry, accounting for around 20% of total output. The electronics sector is known for its production of semiconductors, integrated circuits, and other electronic components. Data from Singapore's Economic Development Board show that manufacturing sector output registered a strong rebound of 7.4% year-over-year in October 2023, after 12 consecutive months of y-o-y contraction.

The services sector contributes over 70.9% of GDP and employs more than 85% of the active population (World Bank, 2023). It is dominated by trade, business services, transportation, communications and financial services. As a regional commercial hub, the Port of Singapore is one of the most important in the world. It ranks second in the total volume of container transhipment traffic after Hong Kong. The growth in transport and storage, health and social services sectors did not compensate for the decline in the recreation and personal services, and the education services. According to Statistics Singapore (2023), the services sector generated a total of SGD 4,441 billion in operating revenue in 2021, representing an increase of 33.4% over the previous year.

Source: World Bank, Latest data available.

Indicator of Economic Freedom

Score:

89,7/100

World Rank:

1

Regional Rank:

1

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

Business environment ranking

Score:

8.54/10

World Rank:

1/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025

Sources of General Economic Information

Ministries

Ministry of Finance (MOF)
Ministry of Trade and Industry (MTI)
Ministry of National Development (MND)
Ministry of Manpower (MOM)
Ministry of Home Affairs (MHA)
Singapore Economic Development Board (EDB)

Statistical Office

Department of Statistics

Central Bank

Monetary Authority of Singapore

Stock Exchange

Singapore Exchange

Other Useful Resources

The Economist - Singapore

Main Online Newspapers

List of online newspapers in Singapore
Channel News Asia
The Business Times
Singapore Business Review

Economic Portals

Economy Watch
The Strait Times Singapore Economy

Political Outline

Current Political Leaders

President: THARMAN Shanmugaratnam (since 14 September 2023)
Prime Minister: Minister Lawrence WONG (since 15 May 2024)

Next Election Dates

Presidential: 2029
Parliamentary: 23 November 2025

Current Political Context

The People’s Action Party (PAP), which has ruled the country since it gained independence in 1965, remains a dominant ruling party in Singapore’s politics. A disruption to the succession plan occurred after the announcement in 2021 by Deputy Prime Minister Heng Swee Keat to step down as leader of the fourth-generation PAP team: Prime Minister (PM) Lee Hsien Loong had planned in 2020 to step aside two years later, but the pandemic delayed his departure. Prior to elevating him to deputy prime minister, PM Lee appointed Finance Minister Lawrence Wong as the new leader in 2021. After two decades as Singapore’s Prime Minister, 72-year-old Lee Hsien Loong stepped down in May 2024. In a seamless and well-orchestrated transition, Lawrence Wong has been sworn in as the country’s fourth leader since independence in 1965. The immediate focus of the fourth-generation leadership team is to secure a mandate in the next general election, which will be held by November 2025 in what is likely to be a more volatile global economic environment. In fact, Singapore may be severely impacted by widespread U.S. tariff impositions and indications of slowing development in China due to its status as a key maritime and logistics hub. The conviction of a serving minister since 1986 for accepting personal gifts while in public office is one example that the People's Action Party has frequently used to showcase its governance record. However, previous election outcomes demonstrate that voters' decisions can be significantly influenced by current socioeconomic concerns.

Main Political Parties

Although Singapore is a multi-party nation, the centre-right Parti d'action populaire (PAP) has dominated its legislature since 1959 and continues to hold an overwhelming majority of the single-chamber parliament.

Opposition parties are widely considered to have no real chance of gaining power. Some opposition groups include:
- Workers' Party of Singapore (WP): centre-left, opposition party with the most seats
- Progress Singapore Party (PSP): centre-right
- Singapore Democratic Party (SDP): a liberal-democratic party.

Type of State

Singapore is a parliamentary republic with a dominant-party political system.

Executive Power

The President of Singapore is the Head of State, and the role is largely ceremonial, though the President retains some discretionary powers in areas such as financial reserves and key public service appointments. After legislative elections, the President appoints the leader of the majority party or coalition as Prime Minister, who serves as the head of Government. The Prime Minister, along with the Cabinet, holds executive powers, including implementing laws and overseeing the day-to-day administration of the country.

Legislative Power

The legislature is unicameral in Singapore. The Parliament consists of up to 105 seats: ninety-three are elected by the people while up to 12 Non-constituency Members of Parliament (NCMP) and up to nine Nominated Members of Parliament (NMP) may be appointed. After the 2020 general election, 93 MPs were elected and two NCMPs were appointed (or, in the terms of the Parliamentary Elections Act, declared elected) to Parliament. While Parliament technically oversees the actions of the government and expresses its support through mechanisms like votes of confidence, the dominant-party system means the ruling People's Action Party (PAP) typically has strong control over legislative processes.

Indicator of Freedom of the Press

World Rank:

160/180

Indicator of Political Freedom

Ranking:

Partly Free

Political Freedom:

4/7

Civil Liberties:

4/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House