RMIT Classification: Trusted
State of the Nation 2022
RMIT Classification: Trusted
State of the Nation 2022
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Events Overview
In the last 6 months, Singapore has firstly observed the
a gradual hike in energy related cost affecting
Singaporeans daily lives. This is attributed by the recent
Geo-Political tension between Russia and Ukraine, both
of which known for their great reserve of natural gases
and energy. As the world faces shortage in supply in
energy as a result of the ongoing conflict between
these two countries, the increase in energy prices
excavates inflationary pressures and weights on global
economic growth. (MTI Maintains 2022 GDP Growth
Forecast at "3.0 to 5.0 Per Cent" 2022)
Secondly, Singapore has manage to achieve a high fully
vaccinated rates including the third booster shot and in
conjunction with the leisure travel through the
Vaccinated Travel Lane (VTL) program with approved
countries has been introduced to Singaporeans in the
last 6 months, this could signify an optimistic outlook
to the recovery of the severely affected industries due
to Covid-19 global lockdown such as Tourism, Aviation
and Construction industry.
Lastly, as our working economy adapted to the ‘new
normal’ of working from home, demand for IT and
digital remains at a high. Hence we should be able to
continue observing healthy growth for the information
and communications sector.
Date
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RMIT Classification: Trusted
State of the Nation 2022
Economic Activity
Figure 1: Quarterly Growth (Singapore Department of Statistics (DOS))
Figure 2: Year-Ended Growth (Singapore Department of Statistics (DOS))
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RMIT Classification: Trusted
State of the Nation 2022
For 2019, we can see positive growth rates of not more than 5% and negative growth rates not
more than -2% for quarterly growth and similarly, positive growth of no more than 5.78% and
negative growth no less than 0.38% for year-ended growth for GDP, Private Consumption
Expenditure, Expenditure and Gross Fixed Capital Formation. As the economy is relatively stable
in 2019, Government Consumption Expenditure dipped in the first two quarters of 2019 as we
can see from Figure 1 by 25.4% and then rose through the third quarter and experienced
positive quarterly growth of Government Consumption Expenditure while the Government
Consumption Expenditure remained similar to the trends for year ended growth as evident in
Figure 2 through the end of 2019.
The Global Pandemic struck global economies in 2020 with Covid-19, hence as evident from we
can Figure 1 and 2 all four factors experienced a consistent downward trend in the first two
quarters of the year. In the last two quarters, we can see that both in Figure 1 and 2, an upward
trend of growth for all four factors steady decline in Government Consumption Expenditure.
This was likely contributed to Singapore Government gaining more control and witness the
public health management stabilizing through the high surges of Covid-19 cases through the
country, with measures such as the Circuit Breaker and thereafter dining out restrictions as well
as contact tracing being rolled out to more effectively tackle the situation, hence aggregate
demand for goods and services started to increase.
After which in 2021, we observe a downward trend of all four factors through the rest of the
year in Figure 1. This is likely to be due to various significant events that happened through the
year such as new variants of Covid-19 like the Alpha and Delta variant that found to be more
was detected on our shores and the various clusters of community Covid-19 cases that surges
whenever the Government eases the dining restriction measurements causing the journey of
economic recovery an unstable one as witness in Figure 1. However in Figure 2, we observe a
general sharp increase of Year Ended Growth for GDP, Private Consumption Expenditure and
Gross Fixed Capital Formation from the first two quarters in 2021, as compared to its
performance in the previous year which was greatly affected by the global economic downturn
due to Covid-19. As for the Government Consumption Expenditure, it continues to decline from
the last quarter of 2020 as Singapore’s economy picking up its pace once again.
According to the GDP growth for the 2nd Quarter of 2020, the top 2 of industries that were the
most severely impacted as economies globally faced a downturn were the Construction and
Retail Trade.
As for the recovery for the Construction and Retail Trade industries from 2nd Quarter of 2020
through 4th Quarter of 2021, Singapore Government has been actively encouraging it’s
population to get vaccinated and boosted, and with its current high rate of fully vaccinated
population, the Government has begun to ease border and domestic restrictions. Opening up
various Vaccinated Travel Lanes (VTL) with certain countries and cities and lifting homebound
restrictions are examples of what could lead to the slow growth in the GDP noticed in this sector
from 2nd Quarter of 2020 through 4th Quarter of 2021. This could mean that the Construction
Industry could begin seeking for migrant workers from South Asia once again to alleviate labor
shortage issue.
Date
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RMIT Classification: Trusted
State of the Nation 2022
While the affected industries suffers due to circumstances, some other industries seemed to
have ‘benefitted’ from this Global Pandemic would be like the Information & Communications ,
Utilities industry as the population were homebound due to the tight lockdown measures
instilled domestically hence digital solutions to keep up with the pre-covid routine were highly
sought after to manage the disruption caused by restrictions posed.
Taking into account the current events happening and the economic impact it potentially would
have on these variables, the GDP, Private Consumption Expenditure and Gross Fixed Capital is
projected to grow and expand in the future while the Government Consumption Expenditure is
projected to reduce as the Global Pandemic situations in many countries are gaining more
stability and control.
Figure 3: Unemployment Rates (Singapore Department of Statistics (DOS))
In Figure 3, we can observe a cyclical unemployment phenomenon. Unemployment rates since
2020 has underwent a spike of close to an additional 1% from total unemployment rate of 2.5%
to the highest total unemployment rate in this period of 3.5% in the 3rd quarter of 2020. This is
likely due to the domestic lockdown and circuit breaker that suspended economic activities and
resulted in demand for employment in many sectors drop. After the 3rd quarter of 2020, the
total unemployment rate observes a steady decline by 0.1-0.4% every quarter, this is likely
attributed by the ease in domestic restrictions, allowing the population to exit their homes and
economic activities begun to slowly recover and pick up demand. The affected industries in
general hasn’t shown any full recovery since the 2020 fall in employment, however they are
collective gaining employment at a steady rate.
Date
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RMIT Classification: Trusted
State of the Nation 2022
Some of the industries that seem to have grown in terms of employment numbers over the
whole 2020 and 2021 periods are the Information & Communications industry, Financial &
Insurance Services and Professional Services.
Unemployment Rates projected in the future are likely to be reduced as economy opens up and
the domestic border opens up to the rest of the world, boosting economy and in turn expanding
the numbers of job opportunities.
Figure 4: Monthly Inflation Rate for Month Aug to Oct 2021
(Singapore Department of Statistics (DOS))
The 6 CPI groups that contributed most to the increase in inflation rates are Education,
Transport, Household Durables & Services, Housing & Utilities, Food Excluding Serving Services,
as well as Food. Many of these groups prices were inflated due to high demands but low supply
issues.
Due to the geopolitical tensions between Russia and Ukraine, energy prices are on the rise,
bringing inflation up in many areas of the world, including Singapore. (Ang Hwee Min
@HweeMinCNA et al., 2022)
Hence as a result we can see CPI Groups such as Transport, and Housing & Utilities inflation
rates are high and increasing steadily from the months August to October 2021.
Date
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RMIT Classification: Trusted
State of the Nation 2022
As for Education, Household Durables & Service, Food Excluding Serving Services and Food CPI
groups, their prices are inflated likely due to the disrupted supply chain and the persistent
supply bottlenecks. (MTI Maintains 2022 GDP Growth Forecast at "3.0 to 5.0 Per Cent" 2022)
Taking into account the current events happening and the economic impact it potentially would
have on these variables, the Singapore Monthly Inflation rate is projected to continue increasing
at least for the energy related CPI groups, but with global economy picking up its pace on
recovery, supply chain dependent CPI groups might begin to notice a deceleration on inflation.
Recommendations
Short Term
The recommendation for short term prosperity would be for Government to undertake an
Accommodating Policy as to respond to the current supply shortage issues raising cost of energy
and putting upward pressure on inflation rates globally due to the Geo-Political tension between
Russia and Ukraine. As our economy has begun progressively reducing the unemployment
rates, the Accommodating Policy complements with the progress and improving on employment
rates will provide means for population to help lessen the burden of inflation.
Long Term
After adjustment of the unemployment rates via the Accommodating Policy taken as the short
term approach, the recommended solution would be a recession. This is balance out the high
inflation rate with the unemployment rates as a result of the Accommodating Policy proposed as
short term solutions. Lowering the expected inflation in its population cause disinflation while
causing increase in unemployment rates temporarily before economy adjust itself back to the
natural unemployment rate, at a further disinflation rate.
Date
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RMIT Classification: Trusted
State of the Nation 2022
Technical Appendix
Figure 5: Philips Curve for Short Term
As a consequence of my short term recommendation to undertake the Accommodating Policy to
address supply shortage issues, we are going to expect an increase in inflation rate as illustrated
from Po to P1, while we bring down the unemployment rate from point Ue to Uo in the Philips
curve illustrated in Figure 4 , which in turns will boost the economic activity.
Date
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RMIT Classification: Trusted
Figure 6: Philips Curve for Long Term (Recession)
As a consequence of my short term recommendation to undertake Recession to curb long term
high inflation rate issues, we are going to expect unemployment rate to rise form Un to U2, and
have the population to lower their expected inflation and SP would shift back to long term
equilibrium at E3 where the economy is more well balanced between unemployment rate at its
natural state and a lower inflation rate albeit this could mean slowly growth in economic
activity.
Word Count: 1598 (Excluding headers and references)
RMIT Classification: Trusted
State of the Nation 2022
References
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Ang Hwee Min @HweeMinCNA, Min, A.H. & Bookmark Bookmark Share
WhatsApp Telegram Face, 2022. Petrol, Electricity prices will rise as Ukraine crisis
pushes up Global Energy Costs: Gan Kim Yong. CNA. Available at:
https://www.channelnewsasia.com/singapore/ukraine-russia-invasion-electricitypetrol-prices-singapore-gan-kim-yong-2525736 [Accessed February 28, 2022].
Anon, 2022. MTI Maintains 2022 GDP Growth Forecast at "3.0 to 5.0 Per Cent". MTI
Ministry of Trade and Industry Singapore. Available at: www.mti.gov.sg [Accessed
February 28, 2022].
Anon, Singapore Department of Statistics (DOS). Base. Available at:
https://www.singstat.gov.sg/ [Accessed February 28, 2022].
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