Singapore recorded a 6.3% growth in GDP and a current account surplus of $51.4 billion in 2013. Discuss the extent to which the above figures show improving standards of living in Singapore.

Singapore recorded a 6.3% annual growth in Gross Domestic Product (GDP) and enjoyed a current account surplus of $51.4 billion in 2013, a massive 18.6% of GDP. Discuss the extent to which the above figures show improving standards of living in Singapore. [25]

INTRODUCTION

SOL refers to the level of comfort and material goods available to people in a certain geographic area or of a certain socio-economic status. It includes both material and non-material aspects of life.

THE FIGURES CAN INDICATE AN IMPROVEMENT IN SOL

A 6.3% annual growth in GDP

GDP refers to the total value of all final goods and services produced within an economy within a set period of time.

Can indicate that material SOL has improved since the likely ability of a person to buy goods and services would have increased due to the increase in income levels. This would then lead to an improvement in material SOL

·       Problem 1: Inflation is not accounted for (so better to use real GDP instead)

Ø  Singapore’s inflation in 2013 was 2.4%, so real GDP still increased

·       Problem 2: Population changes are not reflected (so better to use real GDP per capita instead)

Ø  (RWA) Singapore’s population was unlikely to have increased by 6.3% - we know that for a fact. So, real GDP per capita should still have increased

·      Problem 3: Insufficient information to conclude if there was an increase in the wages of an average person by the same extent (so could bring in median wage increase or GINI coefficient)

Ø  Increased tax revenue due to higher growth rates could give rise to greater ability of the government to spend on the following (which improves non-material SOL)

Ø  Infrastructure spending on public and merit goods such as roads, schools, hospitals

Ø  Government transfers

The current account surplus

Balance of Payments is the record of all economictransactions between the residents of the country and the rest of world in a particular period of time

This indicates (X – M) was increasing, which is a component of AD. Therefore there could be an increase in AD, leading to a multiplied increase in national incomes, which has a positive impact on SOL due to greater ability to consume (corroborated with the fact that there was an increase in GDP growth).

·       But that does not provide us any other meaningful information about how material SOL could have improved

THE ABOVE FIGURES COULD POSSIBLY ALSO INDICATE A FALL IN SOL

1.  Higher GDP could have indicated that people were generally working longer hours àTherefore sacrificing leisure time in exchange àfall in non-material SOL

·       It is a possibility since labour productivity did not see a significant increase in the last few years (and even registered a fall in some years despite of efforts to increase productivity)

2.  Possibly more pollution due to higher levels of economic activity

3.  Current account surplus may be due to a fall in import expenditure 

·       People could be importing less consumer goods and services and this may signify a fall in material SOL

WHAT THE ABOVE DATA CANNOT TELL US

1.  The above data gives us some idea how material SOL may have improved but reveals very little about how non-material SOL has changed.

2.  Healthcare

·       Healthcare expenditure per capita gives us an idea on how much is spent on healthcare but nothing would be known about changes in quality

3.  Education

·       University cohort participation rate

Conclusion

We would expect SOL to have improved as 6.3% is a relatively good growth rate. Even after taking into account inflation and population changes, real GDP per capita would have likely improved. However, we need more information, such as change in median wage, to make a better conclusion.