Analysts urge new way to assess Singapore's economy as GDP growth slows to a crawl

Assessing gross national income may soon be more apt.

Singapore may soon need to re-examine the way it measures economic growth as more local companies turn to overseas markets for revenue.

"With the possible shifts in economic structure, there may be a need to re-examine how economic growth is measured in Singapore. The focus will gradually shift towards Gross National Income (GNI) from Gross Domestic Product (GDP)," DBS said in a report.

GNI measures the income earned by Singaporeans regardless of whether it is earned domestically or abroad. This may soon become a better measure of growth compared to GDP, which onle measures the value of all goods and services produced within the geographic boundaries of the country.

"This indicator will more accurately capture the income and/or value created if Singapore’s economic structure becomes more outward driven," DBS said.

"Rather than be constrained by domestic GDP growth of mere 1-3%, Singapore can invest in faster-growing neighbouring countries that offer 5-6% growth or returns. Income generated in the process would be reflected in the GNI and contribute to national income and tax revenue,"the report added.

DBS stressed that though GNI has been historically lower than GDP, this may change if local companies are able to internationalise successfully or if there is increased offshoring of MNCs.

“GNI growth could exceed GDP growth if Singapore is able to successfully build up its “external wing”. While the effect may not be immediate, experience from Japan and Taiwan indicates that this phenomenon could emerge after a period of significant outward direct investment (ODI) by local companies,” DBS noted.