Analysing and Forecasting the Singapore Economy

With the trade dispute between US and China, messy Brexit, slower growth in China and other export markets, the trade dependent Singapore economy is likely to continue with lacklustre performance in 2020.


18 Dec 2019


5 mins

With the trade dispute between US and China, messy Brexit, slower growth in China and other export markets, the trade dependent Singapore economy is likely to continue with lacklustre performance in 2020. 

Table 1 below shows the Singapore GDP at current price from 2015 to 2018:


2015 ($m)

2016 ($m)

2017 ($m)

2018 ($m)

GDP at Current Price





Good Producing Industries















Service Producing Industries





Wholesale and Retail Trade





Finance & Insurance





Business Service







From the table, the service sector contributes about 66% of the GDP.  Although Singapore is heavily dependent on trade which relies on manufacturing export, the service sector is still the most important sector of the economy and hence a strong growth in the economy requires a good performance in the service sector.  As this sector is labour intensive, it also contributes significantly to employment.  A healthy labour market will boost domestic service demand in retail and personal services and a low interest rate environment will help to promote finance service demand.  The push for digitalilsation will generate IT service demand.  Barring unforeseen circumstances, the demand for service sector is likely to remain healthy and this sector will continue to be the engine for growth in 2020.

The manufacturing sector contributes about 21% of the GDP and is the second pillar of growth in the Singapore economy.  The electronics cluster has the heaviest weight in the manufacturing sector, followed by the biomedical manufacturing and the transport engineering cluster.  In the electronics cluster, the bulk of the manufacturers are closely integrated into the global value chain and hence their performances are tied to the global demand.  A global technological cycle and roll-out of 5G technology will boost demand but high business cost and low value-added per worker are the concerns.  The performance biomedical manufacturing is erratic due to the production cycle of pharmaceuticals.  Stronger demand for air travel will boost the aerospace segment of the transport engineering cluster.  However, it still requires a high oil price to generate demand for marine and offshore engineering output which is unlikely at this period.  Overall the manufacturing sector may see some rebound from the low of 2019 but it is unlikely to have a strong performance in 2020.

The construction sector only contributes about 3% of the GDP.  The performance in this sector can be enhanced by large infrastructure and public housing projects by the government.  Relaxing control on the property market may also result in more private housing projects.  In addition, a low interest rate environment which reduces borrowing cost will help to buoy this sector’s performance. There may be more public construction projects in 2020 but the percentage is small and this is unlikely to have a significant impact on the GDP.

Forecasting the GDP growth using quantitative method is difficult as the past trend may not continue into the future and random event as well as changes in discretionary government policies may derail the forecast.  Applying various forecasting method such as linear regressions with time trend, exponential smoothing and ARIMA modelling, the Singapore GDP is forecasted to grow between a range of 0.5% to 1.5% in 2020.

For the other Asia economies that have close trading relationship with Singapore, majority of them are likely to have weaker performance.  Unless there is an amicable outcome in the China-US trade deal, China’s export will be affected by the high US tariff and the China economy is likely to remain at a moderated growth rate of 6% unless the government introduce fiscal stimulus.  Japan will encounter the aftermath of raising its consumption Tax to 10% and this will hurt its retail sector.  Hong Kong sees no amicably ending to the protests which hurts its retail, tourism and financial sectors.  Thailand’s export and tourism will be negatively affected by the strong Thai Baht while political issues may dampen the growth of Malaysia.  All these incidents are not encouraging and pose further challenges to the Singapore economy in 2020.

By: Tan Khay Boon, Senior Lecturer, Academic Division, SIM Global Education.

Posted online, 18 Dec 2019