The writing is already on the wall; Singapore’s economy is heading to tough times. Although an outright recession is not anticipated, the Monetary Authority of Singapore has gone ahead and advises the populace to brace for dark days ahead. Typically, the media is awash with reports of doom which only work to fuel the slow down even further.

As the former chair of the Federal Reserve, Ben Bernanke, said, the most valuable tool for any central bank is to manage people’s expectations. A perceived recession may as well be the gas need to drive the economy to depression. Singapore’s current downturn is mainly due to slow-down in trade and the decline in successive quarters of the service sector. However, manufacturing and infrastructure can still deliver the envisioned growth. Here’s a look at the positive impacts these two areas can have on the economy.

Increased Government Spending through Infrastructure

One of the tools that helped the U.S. economy to recover from recession in 2009 was fiscal policy through the American Recovery and Reinvestment Act of 2009. It focused on increasing government spending through infrastructure projects, education expenditure, and homeland security.

On a similar note, this year, the government of Singapore upped its total spending to $5.0 billion which is 7.3% percent higher than in FY2015. Increasing expenditure is focused on security, healthcare, education, and urban development.

Infrastructure projects in Singapore such as the extension of the Mass Railway Transport lines, the SmartNation and the KL high-speed rail will not only give a structural lift to the city state. But also deliver a much-needed boost to aggregate demand and a sizeable fiscal multiplier effect. Expenditure is also expecting to target resources towards enabling firms to enhance their capacities to grow their people, scale up and internationalize.

The Manufacturing Lifeline

A surge in manufacturing in the first quarter of 2016 provided hope for the dwindling economy. Although there is plenty of pressure from decreasing exports due to plummeting global demand. This growth was much higher than expected and may deliver the needed lifeline. The manufacturing sector grew by an impressive 23.3 percent during the first quarter of 2016. While the construction subsector expanded by a remarkable 10.5 percent.

Also, the MAS maintained the existing monetary policy against a strengthening U.S. dollar, thus, making exports more viable and attractive. Opponents of this move argue that it would cause a rise in the prices of raw materials used in the manufacturing process, making the products more expensive.

In conclusion, Singapore’s economy remains largely susceptible to global waves due to a high dependency on exports. However, the continued growth of infrastructure, manufacturing and construction sectors will provide the needed lifeline for the ailing economy.


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