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Quick Facts
- Population:
- GDP (PPP):
- $492.6 billion
- 2.0% growth
- 3.3% 5-year compound annual growth
- $87,855 per capita
- Unemployment:
- Inflation (CPI):
- FDI Inflow:
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Singapore’s economic freedom score is 88.8, making its economy the 2nd freest in the 2018 Index. Its overall score has increased by 0.2 point, with improvements in government integrity, labor freedom, and property rights outweighing lower scores for the business freedom and fiscal health indicators. Singapore is ranked 2nd among 43 countries in the Asia–Pacific region, and its overall score is above the regional and world averages.
Singapore’s highly developed free-market economy owes its success in large measure to its remarkably open and corruption-free business environment, prudent monetary and fiscal policies, and a transparent legal framework. The government is prudent in its implementation of an active industrial policy to promote economic development and diversification and is addressing business concerns through significant public investments and targeted fiscal incentives. Well-secured property rights promote entrepreneurship and productivity growth effectively. A societal intolerance of corruption strongly undergirds the rule of law.
Background
Singapore is one of the world’s most prosperous nations. Despite an active parliamentary opposition, it has been ruled by one party, the People’s Action Party, since independence from the U.K. in 1965. In 2015, the PAP won another overwhelming parliamentary election victory. Prime Minister Lee Hsien Loong has led the government since 2004 and will oversee a PAP leadership transition before the next parliamentary election, due by 2021. Although certain civil liberties remain restricted, the PAP long ago embraced economic liberalization and international trade. Services dominate the economy, but Singapore is also a major manufacturer of electronics and chemicals and operates one of the world’s largest ports. Principal exports include integrated circuits, refined petroleum, and computers.
Rights to moveable and real property are well protected, contracts are enforced, and property registration procedures are efficient. Singapore has one of Asia’s stronger intellectual property rights regimes. The judicial system is generally efficient and independent. Singapore is one of the world’s least corrupt countries, although the power of deeply entrenched political elites continues to raise concerns.
The top individual income tax rate is 22 percent, and the top corporate tax rate is 17 percent. The overall tax burden equals 13.6 percent of total domestic income. Over the past three years, government spending has amounted to 17.7 percent of total output (GDP), and budget surpluses have averaged 4.1 percent of GDP. Public debt is equivalent to 112.0 percent of GDP.
The overall entrepreneurial environment is efficient and transparent. Labor laws allow for relatively free hiring and firing practices, but the Ministry of Manpower has started making approvals for foreign labor more difficult. The government funds generous housing, transport, and health care subsidy programs and influences other prices through regulation and state-linked enterprises.
Trade is extremely important to Singapore’s economy; the combined value of exports and imports equals 318 percent of GDP. Essentially, there are no tariffs. Nontariff barriers impede some trade. State-owned Temasek Holdings has significant investments in government-linked corporations. The government has steadily been opening the domestic market to foreign banks, and more than 95 percent of banks operating in Singapore are now foreign owned.