Assessing Singapore's Manufacturing Cost Competitiveness

Singapore is an open economy with total trade more than 3 times its GDP. In value terms, Singapore’s non-oil domestic exports (NODX) are around 70 per cent Singapore’s GDP. Historically, the performance of Singapore’s NODX has shown a high degree of correlation with economic performance, and in particular the performance of the manufacturing sector (Exhibit 1).

The growth performance of NODX in turn hinges on several factors, including the health of external economies as well as export competitiveness. Narrowly defined, export competitiveness is largely determined by the S$ real effective exchange rate (S$REER), which provides a measure of how Singapore goods are priced in relation to the goods of Singapore’s competitors after accounting for differences in nominal exchange rates and domestic costs.

The views expressed in this paper are solely those of the author and do not necessarily reflect those of the Ministry of Trade and Industry or the Government of Singapore.

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