The years that were fat

FIFTY YEARS OF breakneck growth have left Singapore’s economy in a position of enviable strength. Since 1976, GDP growth has averaged 6.8% a year. The past decade has seen vertiginous swings, from a slight recession in 2009 as the global crisis battered a very trade-dependent economy to a 15.2% leap in GDP in 2010. Since then growth has stabilised in the range of 2-4% a year, which the government expects to continue for the next few years. Unemployment is low, just under 2%, and prices are subdued without stoking worries about deflation. The national finances look just as robust. Thanks to the CPF, Singapore enjoys a very high saving rate: nearly 50% of GDP. With investment averaging a still impressive 30% or so of GDP a year, the country has a structural surplus on its current account which last year reached 19% of GDP, a higher proportion than in any other developed economy. It also maintains a consistent fiscal surplus in conventional terms. The constitution mandates that the budget must be balanced over the political cycle, but ring-fences half of the projected long-term investment income earned on the government’s reserves. When all the returns were added in, estimated the IMF, the surplus for the fiscal year ending March 2014 was 5.7% of GDP, compared with the official figure of 1.1%.

The full extent of the country’s reserves is a closely guarded secret. They...

from The Economist: Special report http://ift.tt/1Gonz71