Press Release No. 24/166

IMF Staff Completes 2024 Article IV Mission to Singapore

May 16, 2024

• Singapore’s economy is recovering, driven mainly by strengthening external demand. Gradual disinflation is underway, with risks to inflation tilted to the upside.
• Monetary policy should remain tight until inflationary pressures firmly recede. The broadly neutral fiscal stance in 2024 is expected to complement monetary policy toward achieving price stability. The financial sector remains resilient, with solid capital and liquidity buffers.
• The government’s Forward Singapore initiative will help promote inclusive growth amid rapid population ageing and technological advancements.

Singapore: An International Monetary Fund (IMF) team, led by Mr. Masahiro Nozaki, conducted discussions for the 2024 Article IV Consultation with Singapore during May 7–16, 2024. At the conclusion of the discussions, Mr. Nozaki issued the following statement:

“Singapore’s economy is recovering as gradual disinflation continues. Following a moderation in the first half of 2023, growth has gained momentum since the second half of the year, supported by improved global demand for semiconductors and a rebound in tourism. Monetary Authority of Singapore (MAS) core inflation, which excludes the costs of accommodation and private transport, decreased to 3.1 percent in March 2024, supported by disinflation in food and tradable goods, although signs of persistence in services inflation remain. Labor market conditions started to ease last year amid weaker GDP growth and nominal wage growth slowed in the fourth quarter of 2023, but unemployment remains low.

“IMF staff projects GDP growth to recover to 2.1 percent in 2024 from 1.1 percent in last year, reflecting a continued recovery in manufacturing, tourism, and consumer-facing services. IMF staff projects headline and MAS core inflation to moderate to 3 percent in this year, with the latter expected to stabilize at around 2 percent by 2025. Risks to the growth outlook mainly stem from external factors, such as a steeper than projected slowdown in China, prolonged tight US monetary policy, and deeper geoeconomic fragmentation. On the other hand, stronger global growth would have positive spillovers to Singapore.

“The current monetary policy stance is appropriately tight and geared towards continued disinflation. However, risks to inflation remain tilted to the upside. Notably, intensification of geopolitical conflicts could increase volatility in global energy and food prices. The still tight labor market and accumulated costs pressures from high wage growth in the past could lead to continued inflation stickiness, particularly for services. Accordingly, monetary policy should remain tight until inflationary pressures firmly recede. Once the envisaged disinflation is firmly in sight, monetary policy should be adjusted in a timely manner to address risks to price stability, continued to be guided by data and articulated through clearly communicated policy decisions.

“The broadly neutral fiscal stance implied by the FY2024 budget, with targeted support provided to vulnerable households and firms, is appropriate and expected to complement the tight monetary policy stance towards achieving price stability. With strong public finance and fiscal institutions anchored by the balanced budget rule, Singapore is well positioned to address future downside risks as well as medium- and long-run spending needs arising from the rapidly ageing population, the need to raise productivity, and climate-change risks.

“Singapore’s financial sector remains sound, supported by solid capital and liquidity buffers. Continued maintenance of adequate provisioning buffers, rigorous stress testing, and prudent risk management practices across banks will help navigate external shocks. Non-bank financial institutions have weathered a rise in interest rates well. A sudden downward adjustment in housing prices could still pose a systemic risk for the financial sector, and pockets of vulnerabilities could emerge during stress episodes. In this context, the tight macroprudential policy stance remains appropriate. While risks are well contained at this juncture, continued vigilance is warranted.

“The IMF team welcomes the Forward Singapore initiative, including the reforms it envisages to further strengthen social safety nets, healthcare and pension systems, and lifelong learning programs. These reforms will help Singapore navigate challenges related to a rapidly aging population, while also promoting equitable growth and harnessing the benefits of technological advancements including in Artificial Intelligence. The team also welcomes robust climate policies implemented in Singapore.

“The IMF team would like to express its gratitude to the authorities and other counterparts for their close collaboration and constructive discussions.”