Furry Brown Dog

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Putting Singapore’s GDP in perspective

with 14 comments

Supporters of the ruling party and status quo are fond of citing Singapore’s GDP per capita, one of the highest in the world as evidence that its government has done well. Measuring economic success by GDP has many disadvantages as various other netizens have elaborated. I don’t intend to add to those, but in this post I will endeavour to show how this metric is flawed even without disputing that GXP (where ‘X’ refers to any of various national income accounting measures) measures the economic well-being a country’s people.

In 1959, when the PAP first took power in Singapore, Singapore’s GDP per capita (US$2186) in constant 1990 USD (hence adjusted for inflation and PPP) was second only to Hong Kong’s (US$3027) and Japan (US$3554) in East Asia.  In this respect, Singapore was already ahead of all the countries in East Asia including China and Taiwan, and South Korea. This did not change when Singapore split from Malaysia in 1965, GDP per capita at US$2667 was highest in the region excluding Hong Kong (US$4825)  and Japan (US$5934). These figures are a far cry from the nominal US$500 GDP per capita in 1959 often cited by PAP supporters which ignores both PPP and inflation adjustment. Fast forward to 2008, Singapore’s GDP per capita has overtaken Japan (which was mired for a decade and has yet to recover) but still trails Hong Kong.

Secondly, it is misleading to use GDP per capita when comparing between countries because Singapore only comprises of a single city whereas larger nations have rural areas and smaller towns. A fairer standard of measurement would instead be between cities rather than countries adjusted for purchasing power. This gives rise to the measurement of gross metropolitan product (GMP) per capita , PPP. This measurement compares between cities and towns instead of between countries where the relative poverty of rural inhabitants would distort the measure of GDP per capita. Because PPP involves a routine measurement of a country’s consumer price levels, data is much harder to come by compared to nominal GDP.

The latest data I could find dates back to 2005. Singapore’s GMP per capita PPP when measured against other cities worldwide ranks only at 53rd out of 100 (many other cities above belong to the same country), whilst not a bad showing is far from its spectacular perch of 9th ranking if one considers ranking by country only. This is certainly nothing to crow about.

Lastly, GDP (per capita) suffers from the fatal flaw as a economic indicator because it does not subtract profits earned in Singapore but which is remitted back to foreign shareholders and foreign investors. It also ignores incomes sent back by Singaporean corporations overseas. A more appropriate measure would be gross national product (GNP), which measures national income and profits held by Singaporean firms and residents (citizens + PRs) only. The latest figures for 2009, show that Singapore’s GNP for that year was S$182.536 bn, compared to its GDP of S$265.057bn. In other words, total income and profits for 2009 earned by Singapore residents and firms is only a mere 69% of GDP; the remaining 31% is repatriated overseas.

How does this compare to other countries? Expressing GNP as  a proportion of GDP and ranking all the countries worldwide shows that Singapore is ranked only at 32nd place (figures appear to be dated 2007):

If you’re wondering how impoverished countries like Seychelles and Djibouti could rank above Singapore, remember we’re not talking about GDP or GNP (per capita) here as an absolute measure,  but instead GNP as fraction of GDP. Such a metric is a loose way of determining how much of economic growth is generated by local employees and firms, while netting out foreign contributions. Singapore doesn’t appear to fare particularly well in this category, which likely reflects its over-dependence on foreign-owned corporations (MNCs) and the lack of a strong local economy and comparatively minor contributions to national income of Singapore firms which have ventured overseas.

Update 7th Aug: A commenter named Jason pointed out that the numbers seem off because it only lists 3 countries worldwide as having greater GNI than GDP, which doesn’t make sense since total world GNI and GDP should theoretically equate. So I went to look for another more reliable source and settled on World Bank figures here. More specifically I used GNI Atlas and GDP current US$.

Using data for both GNI and GDP for the year of 2007, and excluding countries for which no GDP and/or GNI figures are provided (for 2007), Singapore ranks about 138th place out of 183 countries worldwide for GNI/GDP:

Here’s the raw data which I used for those who want to see the full ranking. So while the earlier data is off, my conclusion doesn’t change, since Singapore’s ranking according to World Bank figures is even worse.

Update 2: Just to make sure that Singapore’s low ranking was consistent, I counter-checked with another source, this time from the UN National Accounts Main Aggregates Database. Singapore was ranked at 178th out of 211 countries for 2007 GNI/GDP.

PS. The GNI data from the World Bank uses a special Atlas method which smoothens out exchange rate fluctuations and inflation over a few years, whilst the GDP figures are stated in USD terms for the exchange rate of a single year. This may account for some of the discrepancies observed. So like many things in economics, it serves as a reasonable first approximation, but certainly far from ideal. Cross-country comparisons are difficult, I’ll grant you that.

Written by defennder

August 6, 2010 at 11:35 PM

14 Responses

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  1. Nice blog. But be careful with numbers!

    There is massive miscounting in the numbers provided by your source. Only 3 countries have GNI/GDP over 100% and only one of the 3 is a major foreign investor. Yet, accounting dictates that, summed over the entire world, GNI/GDP must be equal to 1. Indeed, the ‘excess’ of GNI over GDP by those 3 countries will not even cover the ‘deficit’ of the United States, let alone China and the rest of the world.


    August 7, 2010 at 10:53 AM

  2. Hi Jason,

    You’re absolutely right. They do look rather suspicious. Thanks a lot for pointing this out. I decided to look for another source and settled on the World Bank’s data. Will be making some edits to the above soon.


    August 7, 2010 at 12:57 PM

  3. Good work but please forgive someone who doesn’t have a head for numbers – I don’t really understand what the main point of your article is.

    I’d appreciate it if you made the main point clearer: since the “metric is flawed”, as you mentioned, what is the larger significance of this on Singaporeans?


    August 7, 2010 at 2:57 PM

  4. […] Brown Dog analyzes the GDP numbers of Singapore and proposes a more accurate indicator to measure the country's economic […]

  5. Hi mr.udders

    The main point of the post isn’t that GDP or GNP is a flawed measure of economic success. I made it clear from the outset that I would not be criticising those as a measure of economic well-being.

    Rather, I sought to show how one should gauge Singapore’s GDP per capita performance by putting it in context. It doesn’t appear as impressive when one considers those points which I elaborated above, such as the fact that GDP per capita was already highest in East Asia before the PAP did anything, and that comparing GDP per capita with GMP per capita of cities worldwide yields a less flattering portrait of Singapore.

    As for the significance of GDP growth on Singaporeans, you may want to check out an earlier post of mine on this. The bottom line of the post is, because of Singapore’s dual economy, locals don’t benefit much when GDP soars but neither do they suffer as much when external trade collapses.


    August 8, 2010 at 9:58 PM

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  8. “Singapore’s GNP for that year was S$182.536 bn, compared to its GDP of S$265.057bn.”

    I don’t think this is accurate – referring to page 82 of the yearbook you cited, the figure of S$182.536 bn is for indigenous GNI, which is not equivalent to GNP. The additional component GNP has that indigenous GNI lacks is incomes earned by foreigners in Singapore but which are not repatriated abroad. If you refer to http://www.singstat.gov.sg/stats/themes/economy/hist/gnp2.html, the GNI figure for 2009 is S$260.605 bn. Therefore the GDP:GNP ratio is not actually so significant.

    I grant that the indigenous GNI figure you cited retains its significance in what you’re arguing – just pointing out that GDP:GNP isn’t as divergent as you claim. Ultimately GDP isn’t an indicator of Singaporean (citizen) welfare, but of the welfare of all who live in Singapore. Even GNP doesn’t meet this role because it includes foreign incomes that are not repatriated. Only indigenous GNI can approximate citizen welfare. So I agree with you that we’re over-obsessed with GDP.

    However, even if we follow your argument that indigenous GNI is just 69% of GDP, I am hardly surprised considering that Singaporean citizens, who are the segment of the population defined as indigenous, comprise 64% (3200.7/4987.6*100%=64% according to http://www.singstat.gov.sg/stats/keyind.html#popnarea) of our population as of 2009. 69% to 64% – so foreigners earn slightly more than Singaporeans. It’s not so stark.


    August 14, 2010 at 5:33 PM

  9. Your point being? What matters is how much of that income is earned by Singaporeans, something you appear to agree with. Who cares about what GNP is supposed to measure if it includes incomes earned by foreigners but not sent abroad?

    Secondly your argument that 69% is not an unreasonable figure given that 64% are citizens doesn’t make any sense at all. You seem to be forgetting something. There are countries whose GNI exceeds GDP (take a look at those lists) GNI/GDP > 100% (so there’s no constraint on 100% which you seem to be implying since resident population is always less than 100%) and whose proportion of non-residents are exceedingly low. Take Japan for eg. In 2010 the share of foreign population in Japan is less than 2% by official figures.

    Given that GNI exceeds GDP this means that the Japanese indigenous population shares a much, much larger role of income compared to Singapore.

    Lastly, I’d like to point out this isn’t a point that’s raised only by me or other bloggers. The Business Times published an article in January on the growing local-foreign divide in GDP:

    The foreign-local divide in Singapore’s economic activities shows up sharply in the indigenous data.

    Particularly the diminishing contributions of indigenous labour and capital in the economy, as Citigroup economist Kit Wei Zheng highlighted in two recent analyses on Singapore’s medium-term growth strategy and policy options.

    Historically, Singapore’s GDP had in most years fallen just a little short of its GNI. But since 2000, GDP has streaked ahead, with the gap – the ‘net income from abroad’ – growing in recent years as income payments accruing to MNCs and other foreign entities in Singapore (ie ‘outflows’) way exceed the income (‘inflows’) earned by overseas Singapore firms. This speaks of the size of foreign investments in Singapore.

    Between 1998 and 2008, the local share of GDP (covering only citizens and permanent residents, PRs) fell from about two-thirds to just over half.

    Over the same period, the gap between per capita foreign GDP (ie attributable to foreigners in Singapore) and per capita indigenous GDP widened, from about S$35,670 in 1998 to S$60,000 in 2008. The gap was biggest at just over S$80,000 in 2006.

    Yet another measure puts across the same point even more starkly : While locals contributed slightly more than half of nominal GDP growth in 2004, they accounted for less than a third of the growth between 2005 and 2008, with growth in 2008 contributed entirely by foreigners.

    As Citigroup’s Mr Kit sees it, if growth sustainability and inclusiveness are major policy goals – as indicated in the Economic Strategies Committee’s terms of reference – then GDP growth per se may not be the best (or should not be the only) policy target.


    August 15, 2010 at 2:04 AM

  10. I’m actually not sure what I’m arguing here, you’re right. I’m just very puzzled by what seems to the the interchangeable usage of GNI and indigenous GNI in your article, in the sources you cite, and in the Business Times article you cite. Let me reiterate that there is a difference between the two, and that the difference can be huge especially since, as you suggest, the ‘outflow’ from Singapore is huge.

    I’ve already established that your article mislabels what is properly IGNI as GNI. Furthermore both your lists seem to measure something other than GNI/GDP, because from what I can see, that percentage, according to Singstat in 2009, is 98.32%, a far cry from the 73.46% and 87.65% your lists suggest. And correct me if I’m mistaken, but this ratio hasn’t changed much since 2000, i.e. we have not seen a drastic increase in the gap between GDP and GNI, which the Business Times article suggests.

    If GNI/GDP is close to 100%, then, isn’t the difference between inflows and outflows marginal?

    My point in citing 69% versus 64% was to show that the difference in standard of living between Singaporeans and foreigners in Singapore wasn’t so stark (and I realise it actually indicates that Singaporeans have a marginally higher standard of living, but of course that’s because foreigners send their money back). But I take it you’re not trying to make a point about that?


    August 15, 2010 at 4:31 PM

  11. Hi

    Great blog and one of the best in Singapore I reckon.

    However, i hope that you can write more as I see that you only write about an average of a blog or two a month.

    Keep up the good writing and I am one big fan of your incredible blog!

    Gilbert Goh


    October 3, 2010 at 7:06 AM

  12. splot

    Sorry for the long absence of reply. I have been quite busy as of late and I did not have time to reply.

    Yes, you rightfully pointed out that what is seen is GNI was interchangeably substituted with IGNI in my post. There are important differences between the two, and it is my opinion that IGNI matters more than GNI and/or GDP. Unfortuntely, as the Business Times article says, Singapore is one of the few countries (if not the only one) which actively publishes GDP due to Singaporeans alone, so a direct comparison with other countries is not possible. This is a good point you made and I thank you for that.

    But are there good reasons to believe that this comparison so deeply flawed that the above analysis collapses? I would argue the answer is no. Here’s why. Foreigners are always a minority in every country, even in immigrant-loving Singapore where some 36.4% of the population is non-local. GNI which measures incomes earned by both foreigners and locals in the countries not sent back overseas is hence a weak substitute for what is earned by locals only. But in some senses it’s still better than if the income were repatriated because this would constitute a “leakage” out of the economy, hence GDP figures would be overstating economic growth in some sense. Income spent or saved overseas cannot be spent in Singapore (which would help grow the small domestic economy) which means repatriated income roughly translates to foregone indigenous economic growth. Singapore fares badly on this front because a larger proportion of what is earned is then leaked out of the country compared to the vast majority of other countries. Its low ranking for both the UN Aggregates and World Bank data reinforce this point very well.

    Please note also that the figures you see here are from 2007. Why did I pick 2007 and not a more recent year like 2009? That’s because in 2008 and 2009, Singapore underwent a severe recession due to a collapse in external demand which greatly impacted the foreign sector negatively while the local sector remained relatively unscathed. Therefore it’s not so surprising that for 2009 alone, GDP shrank relative to GNI which resulted in a GNI/GDP ratio increase. Hence years like 2008-2009 are recession years for which we should not draw any conclusion from because they are not your typical “normal growth” years. The data for 2010 (when Singapore finally recovered from recession) is still not out since the year hasn’t ended yet so I’m not able to verify if this pattern would persist.

    And furthermore, while it’s true that since 2000 the GNI/GDP ratio hasn’t moved much, the Business Times makes it clear that when you focus on indigneous data only, the gap is a lot larger. This is evidence that a lot of economic growth the past decade has been reaped by non-Singaporeans or foreigners who reside in Singapore. While they do spend and save their incomes here, one has to wonder: What good use is economic growth if it doesn’t benefit Singaporeans primarily? Are Singaporeans contented to be left out of strong economic growth as long as it goes to foreigners who spend and save their incomes here? How different is this situation from that of a local security guard who earns low pay by guarding the hoome of much richer foreigner who are residing in Singapore just to evade taxes levied on super-rich in their own home country? Does this strong economic growth only serve to justify regressive tax and fee increases as well as to fatten the pay-checks of already overpaid multi-millionaire ministers?

    But back to the point, if you consult the figures for IGNI/GDP going all the way back to the early 1970s (not available online so I can’t link you), the ratio was a lot larger (ie. the gap between IGNI and GDP was much smaller), usually well above 70% (2007 figure). Singaporeans were the primary beneficiaries of strong economic growth in the past, but ever since 2000 the advent of globalisation and loose immigration policies have meant that they haven’t benefited as much from the growth of this decade as they have in the earlier decades of development. No wonder then that Singaporeans are saying that they don’t feel that their paychecks are growing even though the economy is.

    Lastly, I would like to point out that I was talking about GDP and (I)GNI primarily, not the standard of living in general. The standard of living cannot be adequately captured by measurements of GDP and GNI, especially since Singapore has a surprisingly low wage share of GDP (some 40+%). I would suggest instead comparing actual wages earned PPP worldwide (see pt 2 here for some details on a UBS study on Prices and Earnings 2009), and median wealth of Singaporeans. That should give a more accurate picture of international comparison of standards of living rather than GDP or GNI. It’s somewhat notable that both pictures do not paint a flattering portrait of Singapore.


    Hi Gilbert, thanks for reading my blog as well as featuring selected pieces on yours. I would like to write more if I could, but this must wait until I have more time on my hands. Again I thank you for your interest as well and would also like to thank you for setting up a support site for the unemployed in Singapore.


    October 24, 2010 at 2:47 PM

  13. Statistics can be made to prove anything – even the truth. ~Author Unknown


    April 21, 2011 at 1:22 AM

  14. GDP is a useful measure of the value that the domain offers over a period. In a world that leverages power, leaders with access to growing GDP, mobilising funds, etc, allows for a state to improve its prospects for the future. That’s where citizens then start feeling the zero-sum game of us-vs-them, where own prospects feel threatened, or where trickle-down of GDP to personal incomes fails, and where the income gap widens between rich & poor. When hope for personal futures decline, the prospects for violence and instability increases. The bickering about GDP, GNI, etc, merely shows the irrelevance of the nation-state to the individual and the rising focus on individualism as core to one’s future.


    December 12, 2011 at 12:10 AM

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