Singapore set to overtake HK in size of economy

SINGAPORE'S economy looks set to surpass that of its long-time regional rival Hong Kong this year for the first time.

Powered by a robust Singapore dollar and an exceptionally strong economic rebound last year, the Singapore economy is now the larger of the two, a Bank of America (BoA)Merrill Lynch report showed yesterday.

For the first three months of this year, Singapore's gross domestic product (GDP) was US$63.9 billion (S$79.1 billion), exceeding Hong Kong's US$57.9 billion economy by about 10 per cent.

If this trend continues, Singapore's economy is likely to grow bigger than Hong Kong's for the whole of this year, said BoA's Dr Chua Hak Bin.

'Such a development would have been seen as far-fetched a decade ago, given Hong Kong's geographical advantage, being next to mainland China, against Singapore's more volatile and marginalised neighbourhood,' he said.

Singapore's economy was just half the size of Hong Kong's a decade ago but a combination of factors such as a strong Singapore currency and new engines of growth has propelled the Republic ahead of its rival.

The Singapore dollar has appreciated by some 23.3 per cent against the Hong Kong dollar, which is pegged to the US dollar, over the past 10 years.

Another factor accounting for the shift has been the emergence of new growth engines for Singapore such as high-end manufacturing and the casinos, said Dr Chua.

While Hong Kong did not choose casinos, Singapore's gamble on the integrated resorts has paid off.

Tourism revenue soared to $18.8 billion last year, up 47 per cent from $12.8 billion in 2009. Singapore's gaming market will likely reach $7 billion to $8 billion this year, exceeding the market size of Las Vegas, noted Dr Chua.

Dr Tan Khee Giap, co-director of the Asia Competitiveness Institute at the Lee Kuan Yew School of Public Policy, also pointed out that a key advantage Singapore has over Hong Kong is its flexibility.

He noted that Singapore has always recovered faster and stronger than Hong Kong whenever both are hit with recessions.

Last year, Singapore rebounded from one of its worst recessions, in 2009, by growing 14.5 per cent, the second fastest rate in the world.

'This is due to the fact that we have tools like exchange rate policies and a pro-active Government which implements innovative policies like Jobs Credit to help the economy recover faster,' he said.

'So it's no surprise that we have caught up with them.'

This achievement is all the more impressive given that Hong Kong does not spend on things like defence, which takes up a significant chunk of the Singapore Government budget, said Dr Tan.

This means that Singapore has come into its own, despite the fact that it does not have mainland China as a hinterland, as Hong Kong does, said Dr Tan.

But OCBC economist Selena Ling cautioned that using GDP as a gauge to compare both is not entirely useful.

She noted that Hong Kong has, for some years, been seen to be part of a sub-set of China while Singapore stands on its own.

'So the models are different and I'm not entirely sure if people still compare the two the way they did in the 1990s,' she said.

Likewise, as a financial hub, Hong Kong's stock market is much larger than Singapore's and the Hong Kong stock exchange has been attracting big name listings in recent years, said Dr Chua.

'On that front, Singapore has some way to go,' he said.

The Straits Times

28 May 2011