Taxation in Singapore - Economic History

Economic History

This is a chart of trend of gross domestic product of Singapore at market prices estimated by the International Monetary Fund.

Upon separation from Malaysia in 1965, Singapore was faced with a lack of natural resources, a small domestic market, and high levels of unemployment and poverty. 70 percent of Singapore’s households lived in badly overcrowded conditions, and a third of its people squatted in slums on the city fringes. Unemployment averaged 14 percent, GDP per capita was less than $2,700, and half of the population was illiterate. In response, the Singapore Government adopted a pro-worker, pro-business, pro-foreign investment, export-oriented economic policy. Rejecting free market orthodoxy, the government made state-directed investments in strategic government-owned corporations, and moved towards guiding the economy. Living standards steadily rose, with more families moving from a lower-income status to middle-income security with increased household incomes. During a National Day Rally speech in 1987, Lee Kuan-Yew claimed that (based on the homeownership criterion) 80% of Singaporeans could now be considered to be members of the middle-class.

Singapore's economic strategy produced real growth averaging 8.0% from 1960 to 1999. The economy picked up in 1999 after the regional financial crisis, with a growth rate of 5.4%, followed by 9.9% for 2000. However, the economic slowdown in the United States, Japan and the European Union, as well as the worldwide electronics slump, had reduced the estimated economic growth in 2001 to a negative 2.0%. The economy expanded by 2.2% the following year, and by 1.1% in 2003 when Singapore was affected by the SARS outbreak. Subsequently, a major turnaround occurred in 2004 allowed it to make a significant recovery of 8.3% growth in Singapore, although the actual growth fell short of the target growth for the year more than half with only 2.5%. In 2005, economic growth was 6.4%; and in 2006, 7.9%.

Singapore's unemployment rate is around 2.2% as of 20 February 2009. As of 8 August 2010, Singapore is the fastest growing economy in the world, with a growth rate of 17.9% for the first half of 2010. As of 2012, despite attracting the highest figure in foreign direct investments among countries in Southeast Asia, Singapore has 0.3% growth for its third quarter year-on-year, the lowest among its peers in the region opposite Philippines' which got 7.1% on the same quarter but getting the lowest foreign direct investments at only $2.1 billion.