In this chapter we ﬁrst examine how the Asian ﬁnancial crisis aﬀected the macroeconomic conditions in Singapore and the nature of the government’s policy responses. We then summarize some of the main changes the economy is undergoing and the immediate short-term problems it faces and the nature of the government’s responses. We identify the year 2001 as a possible pivotal year in the history of Singapore in which economic slowdown, continuing globalization and continuing liberalization within Singapore seem to have galvanized the government to formulate a vision of ‘The New Singapore’ which will have a new ‘social compact’ with the people and is to be achieved within ten years. Many of the features of this vision are very diﬀerent from those we have seen to have supported economic growth so far and could create a new paradigm for development in Singapore. We conclude by examining some of the problems associated with this new paradigm. 9.1 THE RECENT RECESSIONS Singapore emerged from the Asian ﬁnancial crisis of 1997 relatively well compared to other countries in the region in terms of growth, inﬂation and the balance of payments. The only important negative impact was on the ﬁnancial sector with falling stock prices, property prices and asset wealth as the currency lost value and incomes fell. Export growth was negative in 1998 but had resumed its 1997 growth rate by 2000. There are a number of reasons why Singapore escaped relatively unscathed compared to Thailand, Indonesia, Malaysia and Hong Kong,...
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