Question

In the table given below, Singapore’s balance of payments (BoP) comprises:
(a) Current account of goods, services & factor income (primary & secondary income balance)
(b) Capital & Financial account as DFI & Portfolio Investment
(c) Errors & Omissions
(d) A+B+C = BoP reflected in E
(e) Reserve Assets
(f) Official reserves (stock as accumulated over the years)
Explain the balance of payments position of Singapore and why traditionally, its trade in services rather than trade in goods dominated its Current Account. Why is this not a problem in policy?

Items % change Balance of payments Current account balance Exports of Goods and services Imports of goods and services Primary Income Balance Secondary Income Balance Capital and Financial account balance (decrease in assets and liabilities, and inflows in net balance) Reserve Assets Official Foreign Reserves Latest Data S&M 4,443.2 21,049.5 188,908.4 161,953.1 -2,058.1 -3,847.7 16,744.3 -6.6 -1.0 6.8 8.7 NA NA NA Previous period data S$M 16,613.8 20,092.9 184,785.5 159,598.4 -1,496.9 -3,597.3 3,096.3 4,443.2 273,114.80 NA 8.3 16,613.8 269,724.1

Answer 1

Balance of Payments position of SIngapore:

1) Deficit in BOP: negative change: 6.6%(overall)

2) Deficit in current account balance: negative change: 2%

3) Increase in exports as well as imports

4) Increase in official foreign exchange reserves

Trade in services rather than trade in goods is dominated in current account balances: Because traditionally, a greater percentage of GDP comes from the trade in services than trade in goods. Hence, we can say, in Singapore, economic growth is speed up because of rapid increase in trade in services.