Singapore still boasts one of the world's largest current account surpluses in relation to its gross domestic product (GDP), despite the weaker global economic conditions.
Minister for Trade and Industry Lim Hng Kiang told Parliament in a written reply yesterday that the surplus declined from 23.7 per cent of GDP in 2010 to 17.5 per cent in 2012, before picking up to 18.3 per cent last year.
Mr Lim was responding to Nominated MP Tan Su Shan, who had asked about the Government's position on the declining trend of falling current account surplus to GDP ratio and whether this trend would reverse soon.
A current account measures the difference between a country's savings and investments, taking into account factors such as trade numbers.
Analysts see it as a way of taking stock of a country's economic health: A surplus indicates a nation is a net lender to the world; a deficit means it is a net borrower.
Mr Lim said the drop in the current account surplus between 2010 and 2012 was mainly due to a decrease in the trade surplus as net exports fell in line with the slowdown in global trade activity.
"Despite this moderation, our current account surplus to GDP ratio remained one of the highest in the world," he said.
Last year's upturn in regional and global trade meant Singapore's trade surplus also improved.
But Mr Lim highlighted that Singapore's current account surplus as a percentage of GDP is expected to gradually decline due to the ageing population.
"This is because of a slower accumulation of savings, even as investment spending continues to support our economic restructuring efforts and the upgrading of public infrastructure," he noted.
Nonetheless, he said, the value of the nation's goods and services export is expected to rise as the economy moves up the value chain and improves its competitiveness.
This in turn will help to ensure resilience in Singapore's trade balance and current account surplus over the medium term.
Mr Lim also gave the assurance that there is still "ample" domestic liquidity, citing three indicators. Firstly, he noted, the surplus in the trade and current account balance remains sizeable and continues to be a source of fund inflow into the domestic economy.
Also, interest rates have remained low over the same period; and finally, he said, his ministry has not seen any unusual flow of capital into and out of Singapore.
This article was first published on July 09, 2014.
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