Markets & Investments

Gross National Income (GNI) is the new black

by Irvin Seah

As Singapore companies go global, there is less reason to focus on GDP, with GNI serving as a more useful indicator instead.

Gross National Income is the new black

As Singapore’s population rapidly ages and business costs rise, foreign investors are looking elsewhere for business opportunities. With this consideration, the most recent Budget 2016 called on local companies to go international. By becoming global players, local companies can create value and become the next growth driver for the nation’s economy.

As more local companies establish bigger footprints globally and the Singapore diaspora community increases in size, Singapore’s GNI may be a more effective indicator of economic success compared to GDP.

When this happens, Singapore’s economic structure will shift significantly in the future, with value creation and income generated by Singaporeans and Singaporean companies overseas rising substantially. As such, measuring growth by Gross Domestic Product (GDP), which looks at the value of all the goods and services produced within a country, may soon be passé.

In its place, Gross National Income (GNI), which measures income earned by Singaporeans both domestically and abroad, may serve as a better indicator. Here are three reasons why.

1) MNCs go offshore, while Singapore’s companies go around the world

Singapore’s GNI has always lagged behind its GDP number because of the strong presence of global entities establishing business interests in the city-state. Their revenues boosted GDP, while repatriation of profits was a drag on Singapore’s GNI. As MNCs look towards other competitive business hubs outside of Singapore and local companies establish bigger footprints globally, Singapore’s GNI may well begin to close the gap on its GDP.

2) More to come from Singapore’s overseas direct investment (ODI)

Learning from the examples of Japan and Taiwan, companies can negate the effects of rising domestic costs by driving overseas sales, leveraging on lower manufacturing costs in other countries and other forms of offshore investments. The aggressive pursuit of ODI has seen the GNI of both countries long outstrip their GDP. While still a small figure compared to its GDP, Singapore’s ODI has increased steadily over the years. With this latest push towards internationalisation, Singapore’s drive towards growing its ODI portfolio has only just started.

3) Lifting growth from elsewhere

VAs a mature economy where productivity growth has stalled, Singapore’s low productivity gain is a result of its ageing demographics and structural constraints. But that’s not to say it can’t look elsewhere for higher growth. By investing in neighbouring countries which offer higher growth and returns, Singaporean companies won’t be constrained by the lower GDP growth rate back home, and the income generated would also be reflected in the country’s GNI.

With more local companies looking into the big move, there is less and less reason to fixate on GDP as an economic indicator of Singapore’s growth. GNI could well become the next buzzword.


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