Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation[1]with Singapore.
Singapore entered the COVID-19 pandemic with sizable policy space and robust economic policy frameworks. These have enabled the authorities to mount a coordinated, comprehensive, and sizable policy response, with fiscal policy acting as a first line of defense. As a result, worse outcomes were prevented and real GDP, which contracted by 5.4 percent in 2020, registered 1.3 percent year-on-year growth in 2021Q1, led by a strong manufacturing sector performance. Labor market conditions were supported by the wide-ranging policy initiatives, and unemployment declined to 2.9 percent in April 2021 from its peak of 3.5 percent in September 2020. Inflation, which had turned negative in 2020, registered 2.1 percent year-on-year in April. Policy support helped banks maintain strong liquidity and capital buffers. The current account surplus was resilient through the crisis and registered 17.6 percent of GDP in 2020.
Singapore’s economic recovery is expected to remain on track in 2021. Activity is expected to accelerate in 2021H2 as vaccines become more widely available, bringing annual growth to 6 percent in 2021. The recovery is expected to be led by manufacturing and modern services, as hard-hit sectors such as aviation and tourism related industries improve more gradually. Inflation is expected to be contained given remaining slack in the labor market. With the recovery in domestic demand, the current account surplus is expected to decline to 15.5 percent of GDP in 2021. Over the medium term, growth should converge to 2.5 percent with the current account surplus declining and MAS core inflation stabilizing at 2 percent. The outlook is subject to unusually high uncertainty, with balanced risks stemming mostly in the near term from the unknown trajectory of the pandemic globally and locally, as well as the path for vaccines. Additional risks include volatile global financial conditions, threats to globalization and trade, and the uncertain impact of the pandemic on the corporate sector.
Executive Board Assessment[2]
Executive Directors welcomed the large and comprehensive policy response to the pandemic and ensuing economic crisis. Following a record contraction in 2020, the Singaporean economy is expected to recover this year. Nevertheless, significant uncertainty continues to cloud the outlook. Directors agreed that macroeconomic policies should remain supportive in the near term while efforts should continue to facilitate a transition toward a greener, smarter, and more inclusive economy over time.
Directors generally agreed that the fiscal response in 2021, with more targeted support, is in line with the recovering economy. Should downside risks materialize, Directors recommended using the ample fiscal space as the first line of defense to prevent a set-back in the recovery. They acknowledged that the authorities’ plan to borrow for major infrastructure projects would generate benefits across several generations.
Directors noted that Singapore’s external position remained substantially stronger than warranted by fundamentals in 2020, although some acknowledged the need to interpret the external sector assessment with caution given uncertainty surrounding the pandemic. They considered that higher government spending to address long-term challenges, along with the expected drawdown of household savings, should contribute to external rebalancing over time. In this context, they encouraged the authorities to quantify the costs of addressing challenges such as population aging, climate change, digitalization, and future pandemics, with a view to guiding future plans for revenue mobilization.
Directors supported maintaining the accommodative, data-dependent monetary policy stance until the recovery is fully entrenched. They welcomed the monetary authority’s liquidity and credit support measures, which have ensured proper market functioning. Given pockets of risks remaining in the financial sector, Directors recommended continued supervisory vigilance, including a close monitoring of nonperforming loans in real estate markets and banks’ foreign currency risk. They also encouraged the authorities to continue to strengthen US dollar liquidity among domestic systemically important banks (D-SIBs). Directors looked forward to further progress in enhancing the effectiveness of the AML/CFT framework and in implementing the 2019 FSSA recommendations.
Directors welcomed ongoing initiatives to facilitate economic transition post‑pandemic. They noted that the authorities’ focus on labor reskilling and training would help facilitate resource reallocation to high-growth sectors. The plans to accelerate digitalization, innovation, and climate-resilient infrastructure investment should help sustain medium-term economic growth.
Table 1. Singapore: Selected Economic and Financial Indicators, 2015–22 | ||||||||
Nominal GDP (2020): US$340 billion | ||||||||
Population (2020): 5.69 million | ||||||||
GDP per capita (2020): US$59,819 | ||||||||
Main goods exports (2020, percent of total non-oil goods exports): machinery & transport equip. (59.8 percent); chemical products (15.8 percent); and misc. manufactured articles (10.6 percent). | ||||||||
Top three destinations for goods exports (2020, percent of gross goods exports): China (13.7 percent); Hong Kong SAR (12.4 percent); and USA (10.5 percent). | ||||||||
Projections | ||||||||
2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |
Growth (percentage change) | ||||||||
Real GDP | 3.0 | 3.3 | 4.5 | 3.5 | 1.3 | -5.4 | 6.0 | 3.1 |
Total domestic demand 1/ | 0.4 | 5.5 | 6.0 | 1.2 | 1.7 | -10.7 | 5.3 | 3.1 |
Final domestic demand 1/ | 4.4 | 2.3 | 3.9 | 0.8 | 2.6 | -10.2 | 5.4 | 3.1 |
Consumption | 5.9 | 3.4 | 3.1 | 3.8 | 3.3 | -8.4 | 5.1 | 3.0 |
Private consumption | 5.2 | 3.3 | 3.1 | 4.0 | 3.3 | -14.1 | 5.6 | 3.1 |
Gross capital formation 1/ | -8.6 | 9.5 | 11.1 | -3.0 | -1.1 | -14.9 | 5.6 | 3.3 |
Gross fixed investment | 2.0 | 0.5 | 5.4 | -4.3 | 1.2 | -13.7 | 6.0 | 3.4 |
Change in inventories (contribution to GDP growth, percentage points) 1/ | -3.0 | 2.3 | 1.6 | 0.3 | -0.6 | -0.5 | 0.0 | 0.0 |
Net exports (contribution to GDP growth, percentage points) 1/ | 3.6 | -0.3 | 0.9 | 2.4 | -0.1 | 3.1 | 2.5 | 1.0 |
Saving and investment (percent of GDP) | ||||||||
Gross national saving | 44.0 | 44.0 | 44.6 | 40.4 | 38.9 | 40.2 | 39.1 | 38.7 |
Gross domestic investment | 25.4 | 26.5 | 27.3 | 25.0 | 24.7 | 22.6 | 23.5 | 23.8 |
Inflation and unemployment (period average, percent) | ||||||||
CPI inflation | -0.5 | -0.5 | 0.6 | 0.4 | 0.6 | -0.2 | 1.4 | 1.4 |
CPI inflation, excluding food and energy 2/ | -0.5 | -0.5 | -0.7 | -0.1 | 0.4 | -0.3 | 1.3 | 1.1 |
MAS core inflation 2/ | 0.5 | 0.9 | 1.5 | 1.7 | 1.0 | -0.2 | 0.8 | 1.4 |
Unemployment rate | 1.9 | 2.1 | 2.2 | 2.1 | 2.3 | 3.0 | 2.7 | 2.5 |
Central government finances (percent of GDP) 3/ | ||||||||
Revenue | 17.3 | 18.5 | 18.9 | 17.9 | 17.9 | 17.7 | 18.7 | 18.6 |
Expenditure | 14.0 | 15.0 | 14.0 | 13.8 | 14.1 | 23.4 | 21.1 | 17.2 |
Net lending/borrowing | 3.3 | 3.5 | 4.9 | 4.1 | 3.8 | -5.7 | -2.4 | 1.4 |
Net lending/borrowing, excluding nonproduced assets | -0.3 | 0.7 | 1.8 | 1.2 | 1.5 | -7.4 | -4.5 | -0.9 |
Primary balance 4/ | -2.5 | -2.5 | -1.4 | -2.0 | -1.9 | -11.1 | -8.4 | -4.3 |
Money and credit (end of period, percent change) | ||||||||
Broad money (M2) | 4.0 | 8.4 | 4.2 | 5.1 | 4.4 | 10.7 | 7.0 | 4.5 |
Credit to private sector | 2.5 | 5.5 | 3.3 | 4.8 | 3.0 | 1.4 | 6.0 | 3.1 |
Three-month S$ SIBOR rate (percent) | 1.2 | 1.0 | 1.5 | 1.9 | 1.8 | 0.4 | … | … |
Balance of payments (US$ billions) | ||||||||
Current account balance | 57.6 | 56.0 | 59.3 | 57.9 | 53.4 | 59.8 | 59.1 | 59.8 |
(In percent of GDP) | 18.7 | 17.6 | 17.3 | 15.4 | 14.3 | 17.6 | 15.5 | 14.9 |
Goods balance | 92.6 | 90.0 | 101.0 | 101.6 | 96.8 | 93.6 | 103.3 | 108.2 |
Exports, f.o.b. | 396.2 | 373.2 | 416.4 | 458.9 | 441.3 | 411.6 | 465.7 | 488.3 |
Imports, f.o.b. | -303.7 | -283.2 | -315.4 | -357.4 | -344.5 | -318.0 | -362.4 | -380.1 |
Financial account balance 5/ | 52.4 | 56.9 | 34.2 | 45.4 | 61.8 | -14.4 | 33.0 | 48.3 |
Overall balance 5/ | 1.1 | -1.8 | 27.4 | 12.5 | -8.4 | 74.9 | 26.1 | 11.5 |
Gross official reserves (US$ billions) | 247.7 | 246.6 | 279.9 | 287.7 | 279.5 | 362.3 | 390.8 | 407.5 |
(In months of imports) 6/ | 6.7 | 6.0 | 6.0 | 6.2 | 6.8 | 7.8 | 7.9 | 8.0 |
Singapore dollar/U.S. dollar exchange rate (period average) | 1.37 | 1.38 | 1.38 | 1.35 | 1.36 | 1.38 | … | … |
Nominal effective exchange rate (percentage change) 7/ | -0.9 | 1.9 | 0.0 | 1.0 | 1.4 | -1.2 | … | … |
Real effective exchange rate (percentage change) 7/ | -2.7 | -0.2 | -1.2 | -0.6 | 0.2 | -2.6 | … | … |
Memorandum items: | ||||||||
Nominal GDP (in billions of Singapore Dollars) | 423.4 | 440.4 | 474.1 | 507.1 | 510.7 | 469.1 | 502.1 | 524.7 |
Growth (%) | 6.1 | 4.0 | 7.7 | 7.0 | 0.7 | -8.2 | 7.0 | 4.5 |
Sources: Data provided by the Singapore authorities; and IMF staff estimates and projections. | ||||||||
Note: Date and forecasts as of June 8, 2021 | ||||||||
1/ Approximation based on available data. | ||||||||
2/ IMF staff estimates, showing projections from 2021. MAS core inflation excludes the costs of accommodation and private transport. | ||||||||
3/ IMF staff estimates on a calendar year basis following GFSM 2014. | ||||||||
4/ Net lending/borrowing excluding net investment return contribution (NIRC). | ||||||||
5/ Following the BPM6 sign convention, a positive entry implies net outflows. | ||||||||
6/ In months of following year’s imports of goods and services. | ||||||||
7/ Increase is an appreciation. | ||||||||
[1]Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2]At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here:https://www.IMF.org/external/np/sec/misc/qualifiers.htm.