Tourism, Real Exchange Rate, And Economic Growth In Singapore: Unraveling Asymmetry
Maria H. Lim
Asia-Europe Institute, University of Malaya, 50603 Kuala Lumpur, Malaysia
Abstract
As the global tourism industry experiences rapid growth, it is increasingly recognized as a pivotal contributor to stimulating economic development, especially in developing nations. The tourism sector serves as an economic "engine," fostering the acquisition of valuable foreign currency, job creation, and additional government revenues. Notable research spanning several years has highlighted the substantial impact of tourism on economic growth (Koch et al., 1998; Oh, 2005; Gunduz and Hatemi-J., 2005; Kim et al., 2006; Proença and Soukiazis, 2008; Lee and Chang, 2008; Chen and Song Zan, 2009; Hye and Khan, 2012; Hampton and Jeyacheya, 2015; Salleh et al., 2015).
The significance of the tourism sector's role in fostering economic growth is particularly pronounced in small island developing states (SIDS) (Hampton and Jeyacheya, 2015). In accordance with the World Development Indicators, eight countries stand out, with more than one-fourth of their national income being derived from international tourism. These countries include Maldives, Macao, Palau, Seychelles, Vanuatu, St. Lucia, Bahamas, and Cape Verde (World Bank, 2017). They are prime examples of SIDS that heavily rely on international tourism for income generation. Notably, tourism is also recognized as an alternative form of exports, contributing to economic diversification (Hampton and Jeyacheya, 2015). For instance, Singapore's government has employed an economic diversification strategy, positioning the manufacturing sector and service sector, including tourism, as the "twin-pillar" of its economic growth (Meng et al., 2015). This strategy has led to remarkable success, with Singapore's tourism sector attracting over 15 million foreign tourists and contributing around US$15 billion, accounting for five percent of the country's GDP (Singapore Tourism Board, 2016).
Despite the evident economic and political significance of tourism, the relationship between tourism and economic growth remains an underexplored topic