Summary
This article is about the growth retails sales and the decline of car sales and luxury goods in Singapore. The Singaporean Department of Statistics reveals that retail sales have increased considerably. This economic trend has been acerbated by the tight labor market that has considerably supported the consumption of daily basic and household utilities. The tight economic situation has led many people to shy away from purchasing luxury goods and instead concentrated on retail products. This decline is also associated with the decline in tourist which has fallen and affected the sale of luxurious products like watches and jewelries. However, there has been an increase in the sales of telecommunication and computer accessories such as iPhone 5 and IT road show Comex. The economics report also shows that the sales of supermarket products, food and beverages, fast foods and recreational facilities have also grown. Apparently, the drop in the luxurious goods and cars are as a result of tight labor markets, unfavorable base effects and lagged effects from the stock market.
Introduction
The purpose of this assignment is to analyze the newspaper article by Nisha Ramchandani, which requires the author to identify the linkage between the economic models and concept. This article highlights the economic trend in Singapore showing the declining sales of luxury goods compared to the food, beverages, households and IT/Telecommunications accessories that has increased. Singapore is one of the fastest economies in the world due to its free market economy that is highly developed and favors business environment. Its economy has been fueled by exports in the areas of services, chemicals and electronics. However, the Singapore relies largely of offshore programs to supply it with human resources. It is estimated that foreign workers constitutes of about 27 % of the country's workforce. It is one of the full countries in the world that has managed to sustain its full employment, with unemployment remaining very low (Ministry of Manpower, 2012). Judging from article, the rise of retail sales of domestic consumption and decline in luxury goods has been caused by the following factors;
First; tight labor market: Tight labor market refers to the case whereby there more jobs than people or more people than jobs. Just it is with the law of supply and demand, when there are more people than jobs then the employers would pay more wages. Similarly, when there are more people than jobs then the cost of labor would decline because the company can choose what they want. The law of supply and demand dictates that there when there is more demand than supply then the price often increases, and when there is more supply than demand then supply decrease The same law of demand also states that when the price of products the quantity demands often falls ( Arnold, 2010). The newspaper article shows that there is weak demand for jewels and watches / luxury goods, while food consumption has gone up compared to luxury goods.
In Singapore the demand for low skilled labor force has fallen and the wages has not dropped. The research shows that employment is up and workers' earnings have increased, affecting the country's economic growth and labor productivity which has continued to slow down. The industrial sectors have experienced employment growth are manufacturing, construction and services (Ministry of Man Power, 2011). The decline in the export has contributed the country's economic slow down and opened up a debate. There is currently lots of debate concerning the influx of low skilled foreign labor force who are seen as causing strain on the countries social welfare and economic resources. The foreigners are also accused of causing overcrowding of accommodation and transport system that has also given rise to property prices, low wages and unemployment. In response the government has limited the flow of foreign laborer to those who highly educated and are well paid for their technical expertise and leadership in pioneering of new industries. The logic behind such approaches it to restructure the economy from foreign dependent to locally dependent labor force (Sayed, 2012). This structuring of the economic relates to fiscal policy whereby the government plays an upper hand.
Secondly; Fiscal policy. Singapore is one of four tiger countries in Asia that also includes South Korea, Taiwan and Hong Kong with a dynamic and stable economy which has been transformed since the mid 1960, largely based on service and manufacturing industries and export trade. The following graph shows the rate of per capita GNP growth from 1960 to 1997 (Gross, 1999).
The Singaporean economic growth has been accelerated by "inward investment in the last three decades especially from the multinational corporations (MNCs)" (Sung, 2006 p.2). The other contributing factors includes " the nature of worker participation, the sustained process of skilling and re-skilling, and most importantly the interaction between the workers and the developmental state approach adopted by the Singapore Government ( Sung, 2006.p.2). This indicates that fiscal policy plays an important role in the economic development of any given country; in Singapore it has performed miracles. Fiscal policy normally deals with the systems and structures that the government has put in place regarding the collection of revenues and expenditures, taxation, control of the inflation, reduction of unemployment levels, social welfare and expansion of economic growth. Its main objectives is to make sure that there is a suitable price stability, patterns of consumer consumption is not interfered with but can be influenced, redistribute the income and accelerating the economic development (Cottarelli & Jarmillo, 2012). In Singapore, Fiscal policies has modeled investment expenditures and opened up the economic which in return has attracted lots of foreign investments, thus contributing to sustainable economic growth (Sung, 2006). However, this growth recently been affected the recent economic slump and stagnation in the South East Asian region that has contributed to many businesses going bankrupt. Nevertheless, Singapore has avoided recent recession despite of the slow growth that is being experienced in other parts of Asian affected by to reduction in exports to other parts of the world like the US, China and Europe (BBC News, 2012).
Third; Monetary policy. Fiscal policies also do affect the monetary structures and systems of any given country (Dahan, 1998) and this is what happened in Singapore. Here the government through Monetary Authority of Singapore decided to tighten its monetary policy to strengthen the Singaporean Dollar against the US Dolllar. The strong Singaporean Dollar has affected the businesses community in Singapore making it expensive for the businesses to export their products overseas. The Monetary Authority of Singapore has continued to maintain its policy of allowing the gradual appreciation of its currency (BBC, 2012). Abeysinghe & Choy, (2007. p. 2), asserts that since 1981 MAS has adopted the "policy of targeting the exchange rate as the most efficacious way of maintaining price stability". Dahan (1998, p. 3) argues that although tight monetary policy can be used as short term solution to "control inflation and contribute to financial stability", it may have long term effects. Some of the long term effects include the expansion of government budget deficit, higher interest rate, debt and sterilization (Dahan, 1998, p.3). The current monetary policy adopted by the Singaporean has contributed to the decline of luxury goods. This is why there are those people who are arguing that the Singaporean government should loosen the tight monetary and allow the depreciation of the Singaporean Dollar. This approach will allow the local businesses to export their products and services and also allow more visitors to come to Singapore and invest more (Sayed, 2012).
Conclusion
This paper has attempted to analyze the newspaper article about the growth of sales and decline of car sales and luxury goods in Singapore in recent months. The author has found out that there is a strong link between fiscal policies and monetary policies as well inflation which affected the customer behavior in Singapore. The demand for low skilled jobs from foreigners has forced the government to introduce tight migration rules and also tightened the labor market. These fiscal policies have continued to favor the domestic consumptions trends in terms of food and telecommunication accessories. The author has thus identified that there is a strong correlation between fiscal and monetary policies such as tight labor market with the current consumer spending in Singapore.
