Singapore originally built its prosperity as an entrepot and as an importer of its neighbours’ raw materials for processing. At independence in 1965, there was a basic electrical assembly industry and some oil refining. During the 1960s these two sectors took off rapidly. There was a huge expansion of oil refining, and in 1967, attracted by tax incentives, Texas Instruments set up a semiconductor plant. Other electronics companies soon followed, and Singapore swiftly became a world player in the electronics industry. Pharmaceuticals subsequently developed, then financial services and tourism stimulated the economy generally.
Singapore has a high level of government intervention, a strong currency, relatively low inflation, and a long track record of prudent macroeconomic management and outstanding growth. GDP grew by 6.7 per cent p.a. 1980–90 and 7.6 per cent p.a. 1990–2000. Substantial inward investment has stimulated rapid economic development and in the 1990s outward investment increased. Since the latter 1990s policy has aimed to increase the innovative, research and development aspects of electronics, biotechnology and other high-tech sectors, so that Singapore would become a centre where new ideas are born rather than one for executing them through skilled and efficient manufacturing.
In the wake of the Asian economic crisis investment and exports (but also imports) were depressed and growth fell sharply from 8.6 per cent in 1997 to –0.9 per cent in 1998, but recovered sharply in 1999–2000, when there was continued heavy investment in new infrastructure. The stock market was liberalised and banking restrictions were eased to allow more competition from foreign institutions.
But the economy plunged into recession in 2001 – shrinking by 2.3 per cent – as a result of the international downturn in information technology. It recovered quickly and returned to vigorous growth during 2004–07, averaging eight per cent p.a., before it again stalled in the world economic downturn of 2008–09, showing growth of only 1.7 per cent in 2008 and a contraction of 0.6 per cent in 2009. But the economy bounced back in 2010, when a surge of growth in the last quarter brought the annual growth rate to 15.2 per cent, among the highest in the world for that year. It then grew more slowly 2011–15 (by 3.9 per cent in 2013 and an estimated 3.0 per cent in 2014).