Singapore's Balance of Payments Continues Strong

Singapore's current account continues to climb. In the third quarter, it was S$20,773 mil. on a seasonally unadjusted basis compared with S$18,263 million in the second quarter and S$14,289 million in the third quarter of 2006. The current account balance was 34% of Gross Domestic Product in the third quarter. The first chart shows the rise in the current account and in its percentage of GDP.

The combined capital and financial account continues to be much smaller than the current account with the result that Singapore' foreign reserves continue to pile up. In the third quarter after allowing for -S$2,634 million of errors and omissions, reserves were increased by S$6,031 million. At the end of the quarter foreign reserves amounted to S$226 billion. Since mid 2003, reserves have been close in amount to the annual rate of Singapore's Gross Domestic Product in nominal terms, as shown in the second chart.

Singapore in contrast to some of the other Pacific Rim countries who are accumulating reserves, has been more relaxed about letting its currency appreciate relative to the dollar. The dollar exchange rates of China, Japan and Singapore are shown in the third chart. The data are plotted on a log scale where the slope of data represents equal percentage changes. Thus the steep decline in the number of Singapore dollars to the U. S. dollar shows a greater appreciation to the dollar than the Japanese yen or the Chinese yuan.