Singapore’s economy surpassed Hong Kong’s for a second year as the Southeast Asian nation gained from a stronger currency, faster population growth and expansion of the casino and pharmaceutical industries.
The CHART OF THE DAY shows Singapore’s gross domestic product was S$326.8 billion in 2011, about $260 billion based on average exchange rates or $252 billion based on year-end currency rates. In Hong Kong, GDP was HK$1.89 trillion, or $243.3 billion using the average and $243.8 billion based on Dec. 30 rates.
Singapore’s dollar appreciated 10 percent against the greenback in the three years through December 2011, while Hong Kong has pegged its currency at about HK$7.8 per dollar since
1983. Hong Kong, with a population of 7.1 million, remains the larger financial center. Still, Singapore has diversified by luring pharmaceutical companies to build plants and ending a four-decade ban on casinos. Its population has risen by more than 1 million since the beginning of 2005, to 5.2 million, based on government data that include residents and transient workers.
“The fact that the Hong Kong dollar is pegged to a U.S. dollar that has weakened and the fact the Singapore dollar has been strengthening has been one major point especially in the past two, three years,” said Chua Hak Bin, an economist at Bank of America Merrill Lynch. “Singapore’s very liberal immigration policy and the willingness to push for some new industries such as the biomedical sector and gaming has seen some success.”
Singapore’s exchange rate averaged S$1.2573 last year, compared with an average of S$1.3632 in 2010. The Hong Kong dollar’s average of HK$7.7843 in 2011 was little changed from HK$7.7688. Further gains by Singapore’s currency may be limited as immigration rules were tightened after a voter backlash led the ruling party to win the general elections in May with the smallest margin of popular votes since independence in 1965.
“Singapore may be reaching the limits of the growth model,” said Singapore-based Chua. “Singapore’s GDP will probably still be higher than Hong Kong’s in coming years but the rates of growth will probably converge.”