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Export-Oriented Countries Such as Singapore Face Substantial Economic Risks from the Eurozone Crisis.

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Question 1 Export-oriented countries such as Singapore face substantial economic risks from the Eurozone crisis. Discuss your views on the above statement. [10 marks] Eurozone
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Since early 2010, the Eurozone has been going through a tedious debate over the resolving of its homegrown crisis, now the “euro zone crisis”. Started from Greece followed by Ireland, Portugal, Spain and then Italy, these Eurozone economies went through a downgrade of their sovereign debt rating, stress of default and a drastic rise in borrowing cost. Fellow Eurozone economies and the future of Euro have been threatened by these developments. Forced to do what it takes, the Eurozone economic disaster is unlikely to return to business as usual soon on its own. (Timeline, 2012) Gross Domestic Product
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The Gross Domestic Product (GDP) is the total value of final goods and services produced in the market, in a fixed duration within a country. It is calculated based on total consumption expenditure, government spending, and domestic investment, adding the value of exports, subtracting the value of imports.

The GDP is a coincident indicator. An increase or decrease in the GDP is a strong indicator of a country’s economic health.

Based on the above, countries heavily dependent on export demand from Europe would face a sharp drop in their value of exports, for example, Singapore, Hong Kong, Taiwan, Korea and Malaysia. Mathematically, a decline in total export value leads a drop in GDP.

With a drop in demand for many countries competing in exports, the excess supply might lead to fall in price to clear goods that are perishable or become out-dated with time. The competition leads to lower profit and in turn affecting the GDP as well.

In Singapore’s case, being export oriented equals increased vulnerability. Singapore’s export as percentage of GDP (gross domestic

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