SINGAPORE'S ECONOMIC STANDING - WHERE STATISTICS DO NOT JIVE WITH REALITY

To dogmatic believers of science and data, and with National Day round the corner, this must be the chart of charts to warm hearts in a world of economic uncertainties. It is a chest-thumping chart for Singaporeans.

This chart plots three economic metrics into one visual snapshot. -  the Government Expenditure, the Gross Domestic Product, (represented in the GE-GDP Ratio), and the Per Capita Income. Government Expenditure is the budgeted fiscal spending. The GDP is the aggregate value of all goods and services produced in the country during the year by residents, whether locals or foreigners.  Per capita income is the aggregate income of all residents (including foreigners) earned in Singapore (includes foreign income if repatriated to Singapore) divided by total population (includes foreigners residing here).

This chart is from Worlddata.info which, for unknown reasons, does not include Singapore. I plotted the exaggerated Red Dot for Singapore onto the chart based on 2022 data of 19.5% for GE-GDP Ratio and Per Capita of US$84,800.

The size of the circles is relative to the countries' population base. Singapore's red dot is exaggerated.

If the chart were to be cut into 4 equal parts, the best place for a country to be would be the South-East quadrant, and that's where Singapore is.  The worst location is the North-West quadrant.

A higher ratio of GE-GDP is an indication of a big government state. There is no hard and fast rule as to what is the optimum ratio. It would seem that developed countries generally have a higher ratio. OECD countries average about 45%-50%, US about 35%-40%. I think this high ratio for developed countries is due to the fact they have better credit ratings and more access to public debt to finance more government spending and run perpetual budget deficits. The high public debt status of these countries bear witness to this suggestion. Scandinavian countries and Japan also tend to the higher ratio due to heavy social spending by the governments. As can be seen, Ukraine is right at the top as the country is at war. Russia is on the right shoulder of China, that big dot to the right of middle. So the war has not eaten significantly into Russia's GDP.

Keynesian economists view big government spending distorts a country's macro-economics.  Big government spending is usually an interventionist policy to stimulate short term consumption and nudge the economy during times of economic constriction. Singapore politics are relatively tame affairs so most folks are unaware of the economic impact of an election. In countries like US and Philippines, during an election year, spendings by political parties can cause significant spikes in the GDP.  A clear illustration of huge discretionary spending distorting the economic numbers. The chart is based on 2022 data so there is some inherent distortion due to government fiscal stimulus during the pandemic.

Economists have no consensus on a specific "healthy" ratio of GE-GDP. Common wisdom suggests that fiscal spending should be balanced with revenue, be efficient, and sustainable. A country's unique economic context, policy objectives, and institutional capacity more likely are the factors that determine the ratio. Nevertheless, the ratio is an indication of a country's comparative label of big governance. The lower the ratio the more it indicates the level of free market of the country's economy.

Surprisingly, Singapore's 19.5% GE-GDP Ratio is amongst the lowest. This seems to be at odds with all indications that Singapore has all the characteristics of a statist state, which means big government. A possible reason could be Singapore scores extremely low compared to other countries in terms of social spending. There have been some warnings this ratio will rise over the next 5 to 10 years due to projected increase in health cost in an ageing population. However, this projected increase is due to demographic shifts, so it is an issue of aggregate costs, not the level of social spending

Positions on the extreme right of the chart is an indication of high standards of living. Singapore has a per capita of US$84,800 which is a very good standard of living being in the class with countries like US, Saudi Arabia, UAE and Qatar. Singapore's per capita grew by an incredible 268% from US$23,000 in 2003 to US$84,800 in 2022. Did our standard of living grew that much in 20 years? This is where statistics lie. Per capita is a rough average number which is easily influenced by a few outlier billionaires taking up residency in the country. This outlier impact is extremely pronounced in the case of Singapore with a low population base. Two billionaires taking up residence in China would hardly make a dent in Chinese per capital figure, but for Singapore, the impact will be very significant. Singapore's pro-business policy to attract high net worth families have worked extremely well. A great pull factor is the Lion City is now a well-established business hub for foreign companies, together with UAE and Hong Kong. The push factor in the last 15 years is the cultural chaos and break down of law and order in Western countries have seen the mobile high net worth families emigrating and Singapore has been a beneficiary recipient country.  The high per capita statistics is not representative of the standard of living for the ordinary Singaporeans.

Back in 1984, then Minister of Trade & Industry, Goh Chok Tong envisaged Singapore will strive to achieve Swiss standard of living by 1999. Generally, the metric of reference for standard of living is per capita income (adjusted for cost of living). In 1984, Swiss per capita was US$17,000. Goh almost hit the bulls eye in nominal terms as Singapore's per capita reached US$18,000 in 1993. From 2003 to 2022 Singapore's per capita increased by 268% compared to the Swiss increase of 90% for same period. 

Standard of living would by right cover other qualitative factors. The Mercer Quality of Living Survey is a good index to guage comparatively. This survey is however, on the basis of cities, not country. In the Mercer report for 2023 on 241 cities, Switzerland had 4 cities in the top 14 ranking with Zurich at the 2nd spot. Singapore was ranked 28th. This Mercer report cannot justify Goh's goal because firstly, the metrics are entirely different, and secondly, this survey's maiden year was 1994.

On the surface, the chart shows Singapore to be in an extremely good position economically. For HDB heartlanders, the statistics do not seem to pan out in their circumstances. Perhaps there are some Austrian economists here that can make sense of  all this. Is there any Ludwig von Mises or Fredrich Hayek around?

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