Singapore’s gross domestic product (GDP) could outpace Hong Kong’s in the next few years, or even this year, according to Chua Hak Bin, an economist from the Bank of America Merrill Lynch.
For Q1 2011, Singapore’s GDP was registered at US$63.9 billion. This has overtaken Hong Kong’s US$57.9 billion by approximately 10 percent. Dr. Chua believes that Singapore’s economy may soon outrank Hong Kong’s, due to the country’s structural factors such as demographic change, currency policies, new economic growth engines and narrowing income tax gaps.
Dr. Chua added that the size of the financial sector in Singapore has some catching up to do. Value added from Singapore’s financial sector in 2010 was recorded at US$25.1 billion, 32 percent below Hong Kong’s US$36.9 billion. The two countries are often pitted against each other on different global rankings as Asian financial hubs.
“Singapore’s focus on targeting the private wealth management and asset management industries has, however, preserved and differentiated its financial hub status,” Dr. Chua said.
Considering the overall GDP, Mr. Chua noted that the current convergence is rapidly approaching a point where Hong Kong has been overtaken by Singapore due to structural factors that “go beyond air quality.”
The make-up of the rest of the country’s economy, with the biomedical sector, tourism and gaming revenues from the launch of the two integrated resorts delivering new growth engines, has worked to its advantage.
Hong Kong, whose manufacturing contributes only two percent, compared to Singapore’s 21 percent, tends to depend on more traditional factors, such as its financial sector and China.
Another factor is currency changes. The Singapore dollar appreciated 8.2 percent against the USD-pegged Hong Kong dollar in 2010 and 23.3 percent over the past decade.
Singapore’s quick population growth is also considered a contributing factor. At an average annual rate of 3.5 percent from 2005 to 2010, it was five times quicker than Hong Kong’s 0.75 percent.
Looser immigration policy fuelled a bigger labour force and drove Singapore’s real GDP growth to a higher annual average of 6.5 percent over the past five years, compared to Hong Kong’s four percent.
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