in new growth clusters. while the manufacturing sector had continually undergone restructuring and moved up the value chain in the preceding five decades, this was the first time the entire economy was undergoing such a transition. • it proved particularly challenging for many traditional domestically - oriented services like retail, hospitality, construction, real estate, and social services, which had come to be heavily dependent on cheap labour over the decades. • while many firms in these sectors successfully upgraded themselves and became more efficient, there was a substantial reduction in the size of these sectors by the early 2020s. but the decisive turnaround in the quest for productivity came when services industries with a traditionally domestic orientation, like education and healthcare, re - positioned themselves by scaling up, investing in technology and talent, and exporting their services. the idea of singapore as a global school house was not new but it was pursued with renewed vigour and came to full fruition only during this period. singapore positioned itself as a choice location for quality education for a growing asian middle class. • by 2025, international students studying in singapore could be awarded joint degrees from 10 of the top 20 universities in the world. • singapore was well on its way to become the premier educational hub of asia. similarly, the healthcare sector was opened up. • by 2025, singapore had become a multi - faceted medical hub hosting the world ’ s top medical professionals and multi - national healthcare companies. • this led to a vibrant ecosystem that created jobs in areas from research and training to conventions for medical professionals both locally and abroad, in addition to the large and diverse number of good jobs in hospitals. this third phase of singapore ’ s economic history marked the most significant step - down in singapore ’ s economic growth, with real gdp growing by 3. 6 % per annum. however, it also marked the painful but successful economic transition towards productivity - led growth. by 2025, the economy had matured, with productivity growth accounting for virtually all of economic growth. bis central bankers ’ speeches 2026 – 2040 : regional integration and technological transformation the fourth phase of singapore ’ s economic development saw the fruition of the decades - long quest for regional integration and the rise to prominence of what we refer to today as our offshore economy. this was also the period that saw widespread technological transformation and the emergence of the ideas economy. by 2040, the global centre of economic gravity had shifted decisively to asia. • china was by far the largest economy in the world,

of hard disk drives – an early form of memory storage used in computers at the time. the first two decades of singapore ’ s economic history could be described as the “ take - off ” phase. it was the period when the economic fundamentals of prudent public finances, sound monetary policies, co - operative industrial relations, outward orientation, and market - based strategies took root. the economy grew by an average of about 10 % each year during this period, and singapore emerged as a newly - industrialised economy at the forefront of developing countries. 1985 – 2010 : liberalisation and the rise of modern services in 1985, the singapore economy went into recession – the only time in our history the domestic economy contracted while the global economy was still growing. the 1985 recession exposed structural strains in the economy, which had hitherto been masked by strong economic growth. • as the earlier phase of “ catch - up ” growth came to an end, resource constraints and diminishing returns to investment began to set in. • the cost advantage that singapore enjoyed began to narrow. the 1985 recession was a significant milestone in singapore ’ s development history. it led to a fundamental review of the policies and strategies that prevailed at the time. the most bis central bankers ’ speeches important outcomes from that period of review which continued into the 1990s were the structural reforms to : • enhance wage flexibility in the labour market ; • tap more decisively into regional markets for trade and outward investment ; • step up the pace of industrial upgrading ; • promote innovation, enterprise, and entrepreneurship in the economy ; and • liberalise various services sectors such as finance, telecommunications, and utilities. in fact, the key story post - 1985 recession up till the global financial crisis of 2008 was the rise of modern services as a twin engine of growth alongside manufacturing. • the share of modern services in gdp increased steadily, from 16 % in 1965 to 24 % in 1985 and 28 % in 2010. financial services. singapore was already a thriving regional financial centre since the 1970s. in the late 1990s and early 2000s, the insurance and securities industries were completely liberalised and progressive steps were taken to open up the domestic banking industry to foreign competition. business services. a broad range of business activities – accounting, law, advertising, and consultancy – grew in importance, playing an important role in cementing singapore ’ s status as a regional hub. info - communications services. the government embarked on a plan to computerise the civil service in the early 1980s. this