## 1sgpea2021001

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### The COVID-19 pandemic: pre-crisis strengths and challenges
- Strengths prior to the pandemic:
  - Large net public sector assets from fiscal prudence and strong compliance with the balanced budget rule.
  - Monetary policy credibility, first-rate financial sector regulation and supervision, and a resilient financial sector.
  - Strong economic policy institutions and frameworks enabling management of domestic and external shocks.
- Challenges prior to the pandemic:
  - Growth moderated: averaged 3.6 percent during 2012-19 versus 7.3 percent during 2002-07.
  - Declining productivity growth, especially in domestic-oriented sectors.
  - External headwinds from the tech cycle downturn and global trade tensions; growth as low as 1.3 percent in 2019.
  - Longer-term issues: aging, technological shifts, and climate change.

### Recent macroeconomic developments and sectoral effects
- Aggregate and sectoral outcomes:
  - First COVID-19 cases registered January 2020; virus spread worsened in 2020Q2 with strict containment measures.
  - Real GDP contracted by 13.3 percent year-on-year in 2020Q2.
  - Overall real GDP contracted by 5.4 percent in 2020.
  - Growth reached 1.3 percent year-on-year in 2021Q1, led by strong manufacturing performance.
  - Hardest-hit sectors: tourism, consumer-facing services, and construction.
  - Relatively resilient sectors: manufacturing, information & communication, finance & insurance.
- External sector and trade:
  - NODX pickup led by non-monetary gold, specialized machinery, and electronics.
  - NODX to the U.S., Japan, and Korea grew in 2020; NODX to China declined.
  - NODX reached 11.3 percent year-on-year in real terms in 2021Q1.
  - Services trade declined sharply in 2020 and remained subdued in 2021Q1.
- Labour market:
  - Retrenchments rose to 12.8 per 1,000 employees in 2020 from 5.1 in 2019.
  - Total employment fell by 181,000 in 2020, led by the service sector; non-resident employment accounted for the decline while resident employment increased.
  - Employment growth (excluding migrant domestic workers) turned positive in 2021Q1 with net increase of 4,800.
  - Retrenchments fell to pre-pandemic levels by 2021Q1.
  - Unemployment: peaked at 3.5 percent in September 2020; 3.3 percent at end-2020; 2.9 percent in April 2021.
- Inflation:
  - MAS core and headline average inflation recorded -0.2 percent in 2020.
  - MAS core inflation increased to 0.6 percent in April 2021; headline inflation reached 2.1 percent in April 2021.
- Housing and real estate:
  - Private house prices increased 2.2 percent in 2020 and 6.6 percent in 2021Q1 (y/y).
  - Household mortgage loan NPLs remained stable at ½ percent of the bank’s mortgage book in 2020.
  - Office and retail prices declined by 9.5 percent and 4.6 percent respectively by end-2021Q1.
  - Vacancy rates: retail from 8.0 percent in 2020Q1 to 8.5 percent in 2021Q1; office from 11.0 percent to 11.9 percent over same period.
- Corporate vulnerabilities:
  - Median cash ratio 39 percent as of end-2019; increased to 43 percent in 2020Q2.
  - Corporate debt rose to 169 percent of GDP in 2020Q2 (156 percent at end-2019).
  - Share of debt-at-risk doubled to 28 percent in 2020Q2.
  - Corporate debt rollover risk decreased to 38 percent in 2020Q4 from 43 percent in 2019Q4.

### Policy response: fiscal, monetary, and financial measures
- Fiscal response:
  - Substantial fiscal package of about S$97.3 billion, or 20.7 percent of GDP in FY2020.
  - Above-the-line measures about 16 percent of GDP supporting healthcare and assistance to businesses, workers, and households.
  - FY2020 corresponds to April 1, 2020 to March 31, 2021.
  - Overall fiscal balance excluding land sales turned to a deficit of 10.4 percent of GDP in FY2020 (from a surplus of 1.7 percent of GDP in FY2019).
  - Fiscal impulse: imparted a 12 percent of GDP fiscal impulse in FY2020 (or calendar-basis 10 percent of GDP fiscal impulse in 2020); estimated to have added 5 percentage points to growth in 2020 (assuming multiplier of 0.5).
  - Tax revenues declined by 0.9 percent of GDP; net investment returns contributed 0.5 percent of GDP.
  - Key measures (estimated size in percent of GDP):
    - Emergency public health measures to fight COVID-19: 2.9
    - Support for jobs, workers, businesses: 15.6
    - Wage subsidies under the Jobs Support Scheme: 5.7
    - Loan capital (below-the-line measure): 4.7
    - Support to households: 2.1
    - Care and Support Package (CSP) and Solidarity Payment: 1.2
- Monetary and financial sector response:
  - MAS eased policy at end-March 2020; maintained a zero percent appreciation rate of the S$NEER policy band since then.
  - MAS provided liquidity through money market operations.
  - MAS-Federal Reserve US$60bn swap line announced March 2020 and extended through end-December 2021.
  - Financial relief: opt-in moratoria on loan repayments, extension of payment terms for trade finance facilities, additional financing for working capital, regulatory and supervisory flexibility.
  - Cap on domestic bank dividend distribution to 60 percent of FY2019 level.
- Financial sector resilience:
  - Total regulatory capital to risk-weighted assets: 17.8 percent in 2021Q1 (up from 16.8 percent in 2020Q1); regulatory minimum is 10 percent.
  - NPLs at 1.5 percent of total non-bank loans in 2021Q1 (down from 1.6 percent in 2020Q1).
  - Non-bank deposits increased 4 percent y/y in 2021Q1 (following 9.9 percent y/y increase in 2020).
  - Foreign currency loan-to-deposit ratio declined to 112 percent at end-2021Q1 from 119 percent at end-2020Q1.
  - Domestic currency loan-to-deposit ratio declined to 77 percent in 2021Q1 from 80 percent in 2020Q1.

### External position and medium-term considerations
- Current account and external balance:
  - Current account surplus rose to 17.6 percent of GDP in 2020 (14.3 percent in 2019).
  - IMF staff assesses the CA gap at 1.2 to 7.2 percent of GDP.
  - 2020 REER assessed to be undervalued by 2.5 to 14.5 percent; depreciated by 2.6 percent y/y.
  - Main drivers: financial center status and saving motives related to rapid aging.
  - Increased government spending in response to the crisis reduced public saving.
  - Over the medium term, higher government spending on infrastructure, aging-related outlays, climate change, and digitalization should help move towards external balance.
- External sector key figures (selected):
  - NIIP in 2020 = 308 percent of GDP.
  - Gross assets (2020, % GDP) = 1361.2; Gross liabilities (2020, % GDP) = 1053.4; Debt assets (2020, % GDP) = 617.0; Debt liabilities (2020, % GDP) = 417.6.

### Outlook, projections, and risks
- Baseline outlook:
  - Annual growth expected to be 6 percent in 2021 as vaccines become more widely available and activity accelerates in 2021H2.
  - Recovery more gradual in aviation and tourism-related industries; labor shortages to weigh on construction.
  - Domestic demand recovery to underpin growth, alongside positive contribution from net exports.
  - Inflation expected to pick up but remain contained given remaining slack.
  - CA surplus projected to decline to 15.5 percent of GDP.
  - Vacancy rates for retail and office peaked at 9.6 percent and 12.1 percent in 2020Q2.
  - Over the medium term: growth should converge to 2.5 percent; CA surplus should decline; MAS core inflation expected to stabilize at 2 percent.
- Risks and scenarios:
  - Downside risks include new strains, vaccine effectiveness, vaccine hesitancy, prolonged pandemic, tighter global financial conditions, threats to globalization, and increased corporate vulnerabilities.
  - Upside risks include faster-than-anticipated global vaccine rollout and stronger recovery in the U.S. and Europe.
  - Policy recommendation: fiscal policy remains first line of defense; financial sector support should be targeted and time-bound.

### Authorities’ near-term policy stance and packages
- FY2021 budget and packages:
  - FY2021 COVID-19 Resilience Package: S$11bn (2.2 percent of GDP).
  - FY2021 includes investments toward greener, digital, and more inclusive economy.
  - Overall deficit projected to decline by 7.8 percent of GDP to 2.6 percent of GDP in FY2021.
  - Structural primary deficit expected to decline by 7.3 percent of potential GDP in FY2021, following a widening of 12.2 percent of GDP in FY2020.
  - Authorities retain contingency plans; measures announced May 28, 2021 totaled S$800 million (0.2 percent of GDP).
  - A S$900 million (0.2 percent of GDP) Household Support Package not included in Resilience Package.
- Composition of the FY2021 Resilience Package (percent of GDP):
  - Public health and safe reopening: 1.0
  - Support for jobs, workers, businesses: 1.1
    - Wage subsidies under the Jobs Support Scheme: 0.6
    - SGUnited Jobs and Skills package, including Jobs Growth Incentive: 0.3
    - Support to hardest hit sectors: 0.2
  - Support to households: 0.1
    - COVID-19 Support Grant/Recovery Grant: 0.1
  - Total: 2.2
- May 28, 2021 fiscal measures:
  - Amount: S$800 million (0.2 percent of GDP); financing via reallocation within FY2021 budget.
  - Components: enhanced JSS support for selected sectors; additional cash payouts; rental support for qualifying tenants.

### Financial sector support, relief measures, and supervision
- Loan moratoria and relief:
  - SFRP announced March 31, 2020; opt-in moratoria on repayments and deferment measures for individuals and SMEs.
  - As of December 2020, moratoriums of approximately S$29 billion of property loans (about 14.1 percent of total outstanding property loans).
  - SME moratorium approvals: >6,500 applications >S$9.5 billion approved under first round; as of Feb 2021, >1,300 applications >S$3.8 billion approved under Extended Support Scheme.
  - As of Q3 2020, about S$14.5 billion of loans disbursed to some 18,000 firms under ESG schemes.
- Regulatory and supervisory relief by MAS:
  - Banks allowed to recognize more of regulatory loss allowance reserves as capital until September 30, 2021 (may be extended).
  - Net Stable Funding Ratio adjustment: required stable funding factor for certain short-maturity loans halved from 50 percent to 25 percent until September 30, 2021.
  - Guidance on IFRS(I) 9 accounting loan loss allowances; FIs to consider government measures in assessments.
- Insolvency and restructuring:
  - COVID Temporary Measures Act (2020): temporary six-month relief; bankruptcy threshold raised from S$15,000 to S$60,000; insolvency threshold raised from S$10,000 to S$100,000; temporary revisions expired October 19, 2020.
  - Simplified Insolvency Programme (SIP) effective January 29, 2021 for six months (subject to extension) for eligible micro and small companies.

### Real estate market risks and macroprudential guidance
- Commercial real estate:
  - Outlook uncertain with elevated vacancy rates and lower rents; potential negative impact on collateral values.
  - Around 84 percent of loans collateralized on commercial real estate have LTV ratios <80 percent.
  - Supervisory vigilance recommended to monitor NPLs and bank balance-sheet impact.
- Residential real estate:
  - Weathered pandemic well; sustained demand including foreign buyers in higher-end market.
  - Mortgages represent three-quarters of household debt; large price swings could pose systemic risk.
- Policy recommendation on ABSD:
  - ABSD is an important tool to address housing market systemic risks.
  - Staff recommends eliminating residency-based differentiation by phasing out the measure once systemic risks from the housing market dissipate (noting ABSD is a residency-based capital flow management measure and macroprudential measure (CFM/MPM)).

### AML/CFT, benchmark transition, and payments infrastructure
- AML/CFT enhancements:
  - Central non-public beneficial ownership register established in 2020.
  - Recommendations: ensure greater accuracy of beneficial ownership information; enhance cross-border data gathering and analysis; develop ML/TF risk assessments and supervisory activities for virtual assets; raise AML/CFT awareness among Digital Payment Token Service Providers.
- Transition from LIBOR to SORA:
  - LIBOR anticipated discontinuation in June 2023; MAS established Steering Committee in 2019 to guide transition to SORA.
  - Adoption of SORA broadened significantly; banks launched SORA property loan products; SORA derivatives trading increased.
  - MAS to expand SORA floating rate notes program to longer tenors with a view to achieve substantial transition to SORA by end-2021.
- E-payments infrastructure:
  - FAST introduced in 2014; PayNow introduced in 2017.
  - FAST e-payments growth increased by 60 percent during the pandemic.
  - Government objectives: build inclusive e-payment infrastructure, introduce common standards for interoperability, and enhance domestic and international policy collaboration.

### Public debt, assets, and sustainability assessment
- Public debt and assets context:
  - Public debt is sustainable; large public financial assets are important risk-mitigating factors.
  - Public gross debt (nominal, percent of GDP):
    - 2019: 105.1
    - 2020: 129.0
    - 2021: 154.9
    - 2022: 137.9
    - 2023: 139.0
    - 2024: 140.2
    - 2025: 141.4
    - 2026: 142.6
    - 2027: 143.9
  - Public gross financing needs (percent of GDP):
    - 2019: 9.0
    - 2020: 14.2
    - 2021: 29.2
    - 2022: 23.3
    - 2023: 20.7
    - 2024: 20.8
    - 2025: 21.0
    - 2026: 22.1
    - 2027: 21.8
- DSA baseline and projections (selected):
  - Real GDP growth (percent):
    - 2019: 5.0
    - 2020: 1.0
    - 2021: -5.1
    - 2022: 5.8
    - 2023: 3.6
    - 2024: 2.8
    - 2025: 2.4
    - 2026: 2.5
    - 2027: 2.5
  - Effective interest rate (percent):
    - 2019: 3.0
    - 2020: 3.5
    - 2021: 2.8
    - 2022: 2.8
    - 2023: 2.6
    - 2024: 2.7
    - 2025: 2.8
    - 2026: 3.0
    - 2027: 3.1
- Role of assets and NIR framework:
  - Under the NIR framework, up to 50 percent of long-term expected returns on net assets can be used as budget revenue (Net Investment Returns Contribution).
  - Debt issuance serves domestic market development and CPF investment needs; borrowing proceeds are invested rather than used to fund government expenditures.

### Structural and medium-term policy recommendations
- Near-term to medium-term policy mix:
  - Shift from broad emergency assistance to targeted fiscal and financial relief while maintaining accommodative monetary policy.
  - Exit strategy for targeted measures should align with the breadth and pace of recovery and facilitate resource reallocation across sectors.
  - Continue targeted support for affected individuals and hard-hit but solvent sectors; facilitate restructuring of non-viable corporates.
  - If downside risks materialize, Singapore has fiscal space to deploy policy support; fiscal policy should remain first line of defense without additional monetary accommodation, barring large adverse shocks.
- Structural priorities:
  - Continue transition to digital, greener, and more inclusive economy.
  - Expand programs to accelerate digitalization, support climate-resilient infrastructure, and intensify training and re-skilling.
  - Strengthen uptake of programs to boost productivity, prepare for climate risks, and mitigate exclusions from technological change and population aging.
- Financial sector vigilance:
  - Continue stress testing and monitoring of bank foreign currency risk, real estate NPLs, and corporate and household balance sheet vulnerabilities.
  - Consider dividend distribution limits in the context of updated stress tests; ensure financial relief measures are targeted and time-bound.
- Real estate macroprudential:
  - Continue careful monitoring of real estate markets and associated financial stability risks; adjust macroprudential policies as needed while safeguarding financial stability.

*Source: IMF staff report — Content unit 1sgpea2021001.*

### 1. The COVID-19 Pandemic in Singapore ________________________________________________________ 23

### 1. The COVID-19 Pandemic in Singapore

### Pre-COVID-19 strengths and challenges
- Strengths
  - Large net public sector assets from fiscal prudence and strong compliance with the balanced budget rule.
  - Monetary policy credibility, first-rate financial sector regulation and supervision, and a resilient financial sector.
  - Economic policy institutions and frameworks described as strong, enabling management of domestic and external shocks.
- Challenges prior to the pandemic
  - Growth moderated: averaged 3.6 percent during 2012-19 versus 7.3 percent during 2002-07.
  - Declining productivity growth, especially in domestic-oriented sectors.
  - External headwinds from the tech cycle downturn and global trade tensions; growth as low as 1.3 percent in 2019.
  - Longer-term issues: aging, technological shifts, and climate change.

### Recent developments: macroeconomic impact and sectoral effects
- Aggregate GDP and sectoral effects
  - First COVID-19 cases registered January 2020; virus spread worsened in 2020Q2 with strict containment measures.
  - Real GDP contracted by 13.3 percent year-on-year in 2020Q2.
  - Overall real GDP contracted by 5.4 percent in 2020.
  - Recovery firmed in 2021Q1 with growth reaching 1.3 percent year-on-year, led by strong manufacturing performance.
  - Hardest-hit sectors: tourism, consumer-facing services, and construction.
  - Relatively resilient sectors: manufacturing, information & communication, finance & insurance.
- External sector and trade
  - Goods exports increased after a sharp drop in 2020Q2; NODX pickup led by non-monetary gold, specialized machinery, and electronics.
  - NODX to the U.S., Japan, and Korea grew in 2020; NODX to China declined.
  - NODX continued strong in 2021, reaching 11.3 percent year-on-year in real terms in 2021Q1.
  - Services trade declined sharply in 2020 driven by travel and transport services; remained subdued in 2021Q1.
- Labor market
  - Retrenchments rose to 12.8 per 1,000 employees in 2020 from 5.1 in 2019.
  - Total employment fell by 181,000 in 2020, led by the service sector; non-resident employment accounted for the decline while resident employment increased.
  - Employment growth (excluding migrant domestic workers) turned positive in 2021Q1 with net increase of 4,800 in total employment level.
  - Retrenchments fell to pre-pandemic levels by 2021Q1.
  - Unemployment: peaked at 3.5 percent in September 2020; 3.3 percent at end-2020 compared to 2.3 percent at end-2019; declined to 2.9 percent in April 2021.
- Inflation
  - MAS core and headline average inflation recorded -0.2 percent in 2020.
  - MAS core inflation turned negative in February 2020 and remained subdued through end-2020.
  - Headline inflation recovered to zero at end-2020.
  - In 2021, MAS core inflation increased to 0.6 percent in April; headline inflation reached 2.1 percent in April.
- Housing and real estate
  - Private house prices increased 2.2 percent in 2020 and further increased by 6.6 percent in 2021Q1 (year-on-year).
  - Household mortgage loan NPLs remained stable at ½ percent of the bank’s mortgage book in 2020.
  - Office and retail prices declined by 9.5 percent and 4.6 percent respectively by end-2021Q1.
  - Vacancy rates: retail space edged up from 8.0 percent in 2020Q1 to 8.5 percent in 2021Q1; office space from 11.0 percent to 11.9 percent over the same period.
- Corporate sector vulnerabilities
  - Median cash ratio 39 percent as of end-2019; increased to 43 percent in 2020Q2.
  - Corporate debt rose to 169 percent of GDP in 2020Q2 (156 percent at end-2019).
  - Share of debt-at-risk doubled to 28 percent in 2020Q2.
  - Corporate debt rollover risk (short-term debt to total debt) decreased to 38 percent in 2020Q4 from 43 percent in 2019Q4.

### Policy response: fiscal, monetary, and financial measures
- Fiscal response
  - Substantial fiscal package of about S$97.3 billion, or 20.7 percent of GDP in FY2020.
  - Above-the-line measures about 16 percent of GDP supporting healthcare and assistance to businesses, workers, and households.
  - Fiscal year 2020 corresponds to April 1, 2020 to March 31, 2021.
  - Overall fiscal balance excluding land sales turned to a deficit of 10.4 percent of GDP in FY2020 (from a surplus of 1.7 percent of GDP in FY2019).
  - Fiscal impulse: imparted a 12 percent of GDP fiscal impulse in FY2020 (or calendar-basis 10 percent of GDP fiscal impulse in 2020); estimated to have added 5 percentage points to growth in 2020 (assuming multiplier of 0.5).
  - Tax revenues declined by 0.9 percent of GDP; net investment returns contributed 0.5 percent of GDP.
  - Table of key measures (estimated size in percent of GDP)
    - Emergency public health measures to fight COVID-19: 2.9
    - Support for jobs, workers, businesses: 15.6
    - Wage subsidies under the Jobs Support Scheme: 5.7
    - Loan capital (below-the-line measure): 4.7
    - Support to households: 2.1
    - Care and Support Package (CSP) and Solidarity Payment: 1.2
- Monetary and financial sector response
  - MAS eased monetary policy at end-March 2020; maintained a zero percent appreciation rate of the nominal effective exchange rate (S$NEER) since then.
  - MAS provided liquidity through money market operations.
  - MAS-Federal Reserve US$60bn swap line announced March 2020 and extended through end-December 2021.
  - Financial relief: opt-in moratoria on loan repayments, extension of payment terms for trade finance facilities, additional financing for working capital, regulatory and supervisory flexibility.
  - Cap on domestic bank dividend distribution to 60 percent of FY2019 level.
- Financial sector resilience
  - Total regulatory capital to risk-weighted assets: 17.8 percent in 2021Q1 (up from 16.8 percent in 2020Q1); regulatory minimum is 10 percent.
  - NPLs at 1.5 percent of total non-bank loans in 2021Q1 (down from 1.6 percent in 2020Q1).
  - Non-bank deposits increased 4 percent year-on-year in 2021Q1 (following 9.9 percent year-on-year increase in 2020).
  - Private sector non-bank credit growth broadly unchanged year to March 2021.
  - Foreign currency loan-to-deposit ratio declined to 112 percent at end-2021Q1 from 119 percent at end-2020Q1.
  - Domestic currency loan-to-deposit ratio declined to 77 percent in 2021Q1 from 80 percent in 2020Q1.
  - Large domestic banks reported robust earnings growth and healthy asset quality in 2021Q1.

### External position and medium-term considerations
- Current account and external balance
  - Current account surplus rose to 17.6 percent of GDP in 2020 (14.3 percent in 2019).
  - IMF staff assesses the CA gap at 1.2 to 7.2 percent of GDP.
  - 2020 real effective exchange rate assessed to be undervalued by 2.5 to 14.5 percent; depreciated by 2.6 percent year-on-year.
  - Main drivers: financial center status and saving motives related to rapid aging.
  - Increased government spending in response to the crisis reduced public saving.
  - Over the medium term, higher government spending on infrastructure, aging-related outlays, climate change, and digitalization should help move towards external balance.

### Policy assessment and alignment with Fund advice
- Policy stance and alignment
  - Authorities’ response aligned with Fund advice that fiscal policy should be first line of defense.
  - Monetary policy remained data dependent and significantly eased in response to deceleration in inflation.
  - Government expenditure in recent years increased for healthcare, aging-related spending, transportation infrastructure, innovation, and targeted benefits to promote skills acquisition and reduce inequality.
  - Budget increasingly benefiting from net investment returns on government assets.
  - 2019 Financial System Stability Assessment confirms strong oversight and a resilient financial sector well-positioned to support recovery.

*Source: IMF staff report — 1. The COVID-19 Pandemic in Singapore.*

### 16.      Singapore’s recovery is on track. Activity is expected to accelerate in 2021H2 as vaccines

### Singapore’s recovery is on track. Activity is expected to accelerate in 2021H2 as vaccines

### Outlook and key macro projections
- Annual growth is expected to be 6 percent in 2021 as vaccines become more widely available and activity accelerates in 2021H2.
- Recovery will be more gradual in aviation and tourism-related industries compared to manufacturing or modern services.
- Labor shortages are expected to weigh on the construction sector.
- Domestic demand recovery will underpin growth, alongside a positive contribution from net exports.
- Inflation is expected to pick up as domestic demand recovers but remain contained given remaining slack in the labor market.
- Current account (CA) surplus is projected to decline to 15.5 percent of GDP as recovery in domestic demand drives up imports while exports continue to rise.
- Vacancy rates for retail and office space reached recent peaks of 9.6 percent and 12.1 percent respectively in 2020Q2.
- Over the medium term:
  - Growth should converge to 2.5 percent.
  - The CA surplus should decline.
  - MAS core inflation is expected to stabilize at 2 percent.

### Risks and scenarios
- Outlook is highly uncertain; risks are balanced.
- Downside risks:
  - Local, regional, and global pandemic developments, including new strains and vaccine effectiveness.
  - Vaccine hesitancy.
  - Prolonged pandemic that delays economic normalization.
  - Tighter or more volatile global financial conditions leading to sharp asset price declines and wider credit spreads.
  - Threats to globalization and trade that weigh on exports and growth.
  - Increased corporate vulnerabilities, weakened debt service capacity, and banking sector large exposure to real estate.
- Upside risks:
  - Faster-than-anticipated global vaccine rollout and pandemic containment.
  - Stronger-than-projected recovery in the U.S. and Europe boosting Singapore’s growth.
- Domestic inflation should be closely watched given rising inflation in trading partners and global commodity prices.

### Authorities’ views
- Authorities expect real GDP growth at 6 percent or above in 2021, barring a serious outbreak domestically or globally.
- They expect strong momentum in manufacturing, led by electronics, sustained in 2021, while aviation and travel-related industries remain affected by travel restrictions.
- Substantial policy stimulus domestically and in trading partners has alleviated adverse effects and will continue supporting recovery prospects.
- Labor market is expected to continue recovering, though slack could persist in some sectors in 2021.
- Inflation is picking up but the pace would ease in the second half of the year as base effects fade and global commodity inflation moderates.
- Authorities emphasize the financial sector entered the pandemic with strong capital and liquidity buffers and good asset quality; balance sheets of corporates, households, and banks have remained resilient.
- Authorities disagree with the external balance assessment, attributing CA balance to Singapore’s role as a regional financial hub and high household and government saving patterns.
- Authorities reiterate the need to maintain large fiscal reserves for intergenerational equity and medium-term spending pressures.

### Policies to sustain the recovery: Near-term policy mix
- Under the baseline, shifting from broad emergency assistance to targeted fiscal and financial relief and policies to support post-pandemic priorities, within an accommodative monetary policy, is appropriate.
- Exit strategy from targeted fiscal and financial measures should align with breadth and pace of the recovery while facilitating resource reallocation across sectors.
- Continued targeted support to affected individuals and hard-hit but solvent sectors is likely necessary; restructuring of non-viable corporates should be facilitated.
- Should downside risks materialize, Singapore has ample fiscal space to deploy policy support; fiscal policy should remain the first line of defense without additional monetary accommodation, barring large adverse shocks.
- Financial sector support should remain targeted and time-bound.

### Fiscal policy: composition, stance, and contingencies
- FY2021 budget includes a S$11bn (2.2 percent of GDP) COVID-19 Resilience Package aimed at extending some measures from the preceding year.
- The FY2021 package includes public health care measures to support a safe reopening, targeted support to workers and businesses (including some extension of wage subsidies under the JSS at a lower level), targeted support to hardest hit sectors, and skills upgrade and job creation initiatives.
- FY2021 also supports transition toward greener, digital, and more inclusive economy.
- After widening by 12 percent of GDP in FY2020, the overall deficit is projected to decline by 7.8 percent of GDP to 2.6 percent of GDP in FY2021, mostly due to lower special transfers, in particular reduced wage subsidies under the JSS.
- The structural primary deficit is expected to decline by 7.3 percent of potential GDP in FY2021, following a widening of 12.2 percent of GDP in FY2020.
- Authorities retain contingency plans to deploy additional targeted resources if downside risks materialize; fiscal measures announced on May 28, 2021, totaled S$800 million (0.2 percent of GDP) to support impacted workers, businesses, and individuals (financed through budgetary reallocation within the FY2021 budget).
- A S$900 million (0.2 percent of GDP) Household Support Package, not included in the COVID-19 Resilience Package, aims to provide continued support for families via one-off cash transfers.
- The pace of budget adjustment should align with the recovery and account for medium- and long-term spending needs (aging population healthcare, climate change, pandemic risk, public housing and infrastructure rejuvenation, raising productivity and easing transitions).
- Authorities plan to fund new major long-term infrastructure projects through borrowing under the Significant Infrastructure Government Loan Act (SINGA) with a limit of S$90bn based on a 15-year project pipeline.
- As part of the broad borrowing plan, the government plans to issue S$19 billion of green bonds over the next few years.
- Scaling up infrastructure spending financed through debt is appropriate given low sovereign borrowing costs and potential benefits for deepening debt markets and green finance objectives.

List of Measures (Composition of the COVID-19 Resilience Package in the FY2021 Budget)
- Public health and safe reopening: 1.0 (in percent of GDP) including COVID-19 testing, vaccination, and tracing
- Support for jobs, workers, businesses: 1.1
  - Wage subsidies under the Jobs Support Scheme: 0.6
  - SGUnited Jobs and Skills package, including Jobs Growth Incentive: 0.3
  - Support to hardest hit sectors (e.g. aviation and tourism): 0.2
- Support to households: 0.1
  - COVID-19 Support Grant/Recovery Grant: 0.1
- Total: 2.2

### Monetary and financial sector policies
- The accommodative monetary policy stance is appropriate.
- Since 1981, MAS has operated a basket, band, and crawl exchange rate-based monetary policy framework managing the S$NEER against an undisclosed basket of currencies.
- Since the April 2020 policy easing, MAS has maintained a zero percent per annum rate of appreciation of the policy band and an unchanged width of the band.
- With sustained inflows, FX reserve purchases were US$44 billion in 2020H1, up from US$30 billion in 2019H2.
- Monetary policy should remain data dependent; with a negative output gap and muted inflationary pressures, an accommodative stance is warranted until recovery is firmly entrenched.
- Progress has been made implementing the 2019 FSSA recommendations, particularly in strengthening cyber resilience, payment system oversight, and US dollar liquidity among D-SIBs.
- MAS/Federal Reserve US$ swap line was critical in supporting US$ liquidity during the peak of the crisis; MAS should continue to strengthen US dollar liquidity among D-SIBs and banks’ foreign currency risk monitoring.
- MAS continues to enhance operational readiness of the resolution framework and formalize supervisory expectations on management of material outsourcing risk.
- Stress tests (2020H2) for D-SIBs incorporating COVID shock scenarios showed all D-SIBs would remain solvent with aggregate CET1 capital ratios well above MAS’ minimum regulatory requirements.
- Commercial banks are likely to face continued challenging operating conditions until the pandemic is under control; dividend distribution limits should be considered in the context of updated stress tests.
- Financial support measures should remain targeted to adversely impacted sectors and be gradually withdrawn as recovery broadens.
- Temporary amendments to insolvency framework, raised bankruptcy thresholds, and simplified insolvency and debt restructuring procedures for micro and small enterprises have been implemented.
- Financial indicators to consider when calibrating withdrawal of support include evolution of banks’ lending standards, sectoral credit growth, and indicators of corporate financial health.

*Source: IMF staff and authorities (IMF country report content).*

### 33.      Continued careful monitoring of real estate markets and associated financial stability

### 33.      Continued careful monitoring of real estate markets and associated financial stability risks is called for.

### Real estate market risks and financial stability
- Corporate real estate related debt and household mortgages capture a substantial share of domestic systemically important banks’ assets.
- Outlook for the commercial real estate sector:
  - Expected to remain uncertain, with elevated vacancy rates and lower rents due to pandemic-affected demand for commercial spaces.
  - Lower commercial property prices could negatively impact collateral values and bank exposure quality.
  - Most (around 84 percent) loans collateralized on commercial real estate have a loan-to-value (LTV) ratios of less than 80 percent, limiting potential loan losses to the banks.
  - Supervisory vigilance is needed to monitor related NPLs and their impact on bank balance sheets.
- Residential real estate:
  - Has weathered the pandemic well so far with sustained demand from both domestic and foreign buyers (especially in the higher end of the market).
  - Large price swings remain a significant risk because of Singapore’s internationally attractive market with strong structural foreign demand.
  - Mortgages represent three-quarters of household debt; sudden or large property price fluctuations could pose a systemic risk to the financial sector through potential bank losses and could threaten confidence in Singapore as a large global financial center.
- Policy recommendation on ABSD:
  - The Additional Buyer’s Stamp Duty (ABSD), whose rates have remained unchanged since 2018, is an important tool to address housing market systemic risks.
  - Staff recommends eliminating the residency-based differentiation by phasing out the measure once systemic risks from the housing market dissipate (noting ABSD is a residency-based capital flow management measure and macroprudential measure (CFM/MPM)).

### AML/CFT framework enhancements
- Authorities’ recent actions:
  - Established a central non-public beneficial ownership register in 2020.
  - Use a range of tools including data analytics and intelligence to identify suspicious activities at the transactional or customer level.
- Recommendations to strengthen effectiveness:
  - Ensure greater accuracy of the beneficial ownership information maintained in the central register.
  - Enhance gathering and analysis of cross-border data on corridors, inflows and outflows to support systemic analysis of financial flows and risk-based supervision.
  - Continue development of ML/TF risk assessments and supervisory activities for virtual assets (VA), given rising VA activities and reported ML/TF cases involving VA.
  - Continue efforts to raise awareness of AML/CFT requirements among Digital Payment Token Service Providers.

### Transition to a new short-term benchmark interest rate (SORA)
- Context and timing:
  - Anticipated discontinuation of LIBOR in June 2023.
  - MAS established an industry-led Steering Committee in 2019 to guide transition to the Singapore Overnight Rate Average (SORA).
- Progress and developments:
  - Adoption of SORA has broadened significantly over the past year.
  - Local banks have launched business and retail SORA property loan products.
  - SORA-based commercial loans have been issued to large corporates.
  - Trading in SORA derivatives has increased, supported by MAS’ launch of daily derivatives auctions for price discovery.
- Targets and next steps:
  - Steering Committee focused on encouraging full transition to SORA in new exposures.
  - MAS will expand its SORA floating rate notes program to longer tenors to help develop a robust SORA curve, with a view to achieve substantial transition to SORA by end-2021.

### Authorities’ views on monetary and financial policies
- Monetary and liquidity response:
  - Authorities broadly agreed with staff’s assessment of monetary and financial policies.
  - In response to the COVID pandemic, authorities moved quickly to an accommodative monetary policy stance, complementing fiscal and financial sector measures.
  - Monetary policy stance expected to remain accommodative in the near term given muted inflationary pressures.
  - MAS ensured ample liquidity in the banking sector and worked with the government to maintain flow of credit to households and SMEs.
  - MAS-FED USD swap line, announced in March 2020, helped normalize USD funding conditions in Singapore and the region by boosting market confidence.
  - Domestic banking groups have continued to strengthen their USD liquidity management.
- Financial sector resilience and supervision:
  - MAS will closely monitor banking sector resilience, including through updated stress tests.
  - Any extension of dividend restrictions would consider pandemic-related uncertainties (noting prior guidance: In July 2020, MAS called on Singapore-headquartered locally incorporated banks to cap their total dividends per share for FY2020 at 60 percent of FY2019 levels to pre-emptively bolster their resilience and capacity to lend).
  - Continued implementation of 2019 FSSA recommendations with focus on cyber resilience, payment system oversight, and US dollar liquidity among D-SIBs.
- Assessment of balance sheet risks:
  - Corporate and household balance sheet risks are considered manageable.
  - Corporate: Relatively resilient entering 2020 amid elevated but stable debt levels; COVID-19 led to a fall in earnings and a rise in debt but most firms should withstand short-term pressures; smaller and domestically oriented firms remain vulnerable.
  - Household: Balance sheets were relatively healthy at the onset of the pandemic with accumulated financial buffers; household debt servicing burden remains manageable under stress.
  - Authorities view ABSD as a critical tool to manage systemic risk in the residential real estate market and will remain highly vigilant, continuing close monitoring of real estate market developments.
- AML/CFT commitment:
  - Authorities committed to build on recent steps to enhance the AML/CFT framework and sustain improvement of risk-based assessment using a broad range of tools and data analytics.

*Source: IMF staff chapter on Singapore (Content unit 1sgpea2021001).*

### 50.      The financial sector is healthy but financial supervision should remain vigilant. The

### The financial sector is healthy but financial supervision should remain vigilant. The

### Financial sector health and supervisory priorities
- The banking sector has weathered the pandemic well, helped by MAS liquidity and credit support measures.
- Supervisory vigilance is called for as commercial banks are likely to face challenging operating conditions in the near term.
- While the authorities have provided adequate, temporary, and increasingly targeted, support to corporates, pockets of risks remain for smaller firms and firms in sectors hardest hit by the pandemic.
- The authorities’ enhancements to the insolvency and debt resolution procedures are welcome.
- Continued close monitoring of real estate NPLs, particularly in the commercial segment, is important.
- Progress implementing the 2019 FSSA recommendations includes strengthening cyber resilience, payment system oversight, and US dollar liquidity among D-SIBs, but continued monitoring of bank foreign currency risk remains essential.

### Policy recommendations on structural transition
- Continue efforts to transition towards a digital, greener, and more inclusive economy to help achieve sustained growth post-pandemic.
- Expand government programs that accelerate digitalization and innovation, support investment in climate-resilient infrastructure, and enhance intensified training and re-skilling.
- Strengthen uptake of existing programs to:
  - boost productivity,
  - prepare for a more climate-resilient and prosperous future,
  - mitigate exclusions from technological innovation and population aging.

### Article IV consultation timing
- It is recommended that the next Article IV consultation with Singapore be held on the standard 12-month cycle.

### COVID-19 timeline, containment measures, and vaccination
- Singapore confirmed its first COVID-19 case on January 23, 2020; a multi-ministry taskforce was set up on January 22.
- The Disease Outbreak Response System Condition level was raised to orange from yellow on February 7.
- Precautionary safe distancing measures and travel restrictions were progressively introduced; international borders were closed to all short-term visitors for both entry and transit from March 24.
- Overall infections rose to 926 as of end-March and the first three deaths were recorded.
- A circuit breaker (CB) was implemented from April 7 to June 1, 2020; workplaces except for essential services were closed; masks were mandated outside of homes; public and private gatherings of any size were banned.
- By mid-April, mobility had declined to 60 percent below the levels in the first two months of 2020.
- Daily cases surged to a high of around 1.4 thousand on April 20 due to spread within workers’ dormitories; total confirmed cases reached around 44 thousand in end-June, dominated by dormitory infections.
- Singapore’s 3-phase reopening began from June 2, 2020:
  - Phase 1: reopened low risk services and encouraged people to only leave homes for essential activities.
  - Phase 2 started on June 19 amid low single-digit community cases; the entire economy almost reopened subject to safe distancing measures.
  - Phase 3 began on December 28, easing restrictions further as milestones were reached.
- In late-April 2021, amid a spike in regional infection rates, daily community cases rose to low double-digits; by mid-May, total active cases stood at around 400.
- Singapore launched inoculations on December 30, 2020; frontline and essential workers have been vaccinated, vaccinations rolled out to elderly and mid-age groups and those aged below 45 by June. The authorities plan to vaccinate the whole population within 2021.

### Impact of COVID-19 on non-financial corporate vulnerabilities
- The median cash ratio (cash and cash equivalent divided by current liabilities) of Singaporean corporates stood at 39 percent as of end-2019.
- Cash ratio varied across industries, ranging from 16 percent for firms in the utilities sector to 100 percent in the healthcare sector.
- As of end-2019:
  - about 1/3 of firms were carrying cash buffer less than two months’ worth of cost of goods sold (COGS);
  - about 11 percent of firms are estimated to have had cash buffer less than two months’ worth of the fixed portion of COGS.
- In the first half of 2020, many corporates enhanced their cash positions through the bond market and bank financing, leading to improved cash ratios in some industries in 2020Q2 and onward.
- Debt service capacity (interest coverage ratio, ICR) trends:
  - The share of debt owed by firms with ICR<1 was about 14 percent as of end-2019.
  - This share increased to 28 percent in 2020Q2.
  - The increase of the share of debt-at-risk was substantial especially in the communication services, industrials, and consumer discretionary sectors.
- Debt maturity profile:
  - The share of short-term debt declined to 38 percent by 2020Q4 from 43 percent in 2019Q4, after a temporary increase in 2020Q2.
- Dataset and sample notes:
  - The dataset used comprises 453 nonfinancial firms in Singapore as of end-2019.
  - The sample is biased toward larger firms (the median asset size in the sample of USD 91 mil. and minimum at 0.8 mil., as of end-2019).
  - MAS found that SMEs generally have weaker cash position and are less able to face severe strains than larger corporates.

### Singapore’s climate strategy and carbon pricing
- In February 2021, the government launched the Singapore Green Plan 2030 with five pillars: greener city and sustainable practices; cleaner energy and energy efficiency; sustainability as a way of life; promoting jobs, investments and R&D in the green economy and green finance; and proactive infrastructure planning for coastal and food security risks.
- In 2019, a carbon tax of S$5 (US$4) per ton of CO2-equivalent was adopted, applied to largest emitters covering about 80 percent of Singapore’s carbon emissions.
- The post-2023 carbon tax level and trajectory are being reviewed; earlier plans envisaged increasing the carbon tax level to between S$10 and S$15 per ton of CO2-equivalent by

*Source: IMF staff report excerpt.*

### 2030. Other prior measures comprise limiting the number of cars, increasing fuel excises and

### 1sgpea2021001 - 2030. Other prior measures comprise limiting the number of cars, increasing fuel excises and

### Real sector developments
- Economy contracted at a record 5.4 percent in 2020 amid COVID-19, largely led by the fall in investment and private consumption.
- Contraction affected most industries, except for manufacturing and finance.
- Manufacturing supported by upturn of the global electronics cycle and surge in pharmaceutical output.
- Headline and official measures of core inflation turned negative in early 2020 but started a gradual recovery in H2 2020 as external inflation and domestic spending picked up.
- Prices of cars and car ownership certificates rose in H2 2020 as bidding resumed in July following the COVID19-related suspension, supporting recovery of headline inflation.

### Labor market developments
- Residents’ labor force participation held steady in 2020.
- Total employment contracted sharply in 2020, led by the contraction of non-resident employment.
- Average unemployment rate rose in 2020 but remained below its Global Financial Crisis peak.
- Labor market slack became evident in 2020, with significantly fewer jobs available relative to job seekers.
- Number of retrenched workers soared in 2020, with the service sector bearing the brunt of the COVID-19 shock.
- Contraction in foreign workforce was broad based but largest for semi-skilled Work Permit holders.
- Labor force participation rate (residents, in percent of working age population, LHS) and paid hours worked per week per employee (annual average, incl. overtime, RHS) tracked across 2006–2020 (chart data present in source).

### Monetary and financial sector developments
- Yield curve shifted down; with decline in global rates, money market rates in Singapore moved lower.
- Government bond yields are lower.
- Broad money growth increased, partly owing to higher deposits.
- Singapore stock market fell sharply in the initial phase of the pandemic, but recovered to pre-pandemic levels.
- Foreign exchange market turnover spiked in April 2020 and remained on an upward trend (Daily average volume measured in US$ billions; series shown through Mar-21).

### Banking sector developments
- Banking sector assets as share of GDP increased owing to lower GDP in 2020.
- Non-bank deposits are the largest funding source for banks.
- Property-market related loans (housing loans and loans to the building and construction sectors) account for about 30 percent of total domestic non-bank loans.
- Growth rate of business loans declined, driven by general commerce and transport sectors.
- Deposits increased strongly in wake of the pandemic, with a shift from fixed to demand and savings deposits.
- Banking sector’s foreign currency loan-to-deposit ratio continued to decline in 2020.
- Loan to Deposit Ratio by Currency series shown for Foreign Currency, SGD, Overall from Mar-14 to Mar-21.

### Housing market developments
- House price-to-income ratio remained broadly stable across regions (core central, outside central, rest of central) from 2010Q1 through 2020Q4 (price per sq. ft of non-landed units as a share of overall annual household income at the 71st-80th percentile).
- House price-to-rent ratio has increased.
- Private market transactions remained resilient; vacancy ratio in private market decreased.
- Housing supply per capita remained stable and supply expected to increase in coming years; Upcoming Private Residential Supply Pipeline shown for 2021–2025 (In Percent of 2019 (Q4) Private Housing Stock).
- Household debts, including housing loans, declined since 2015 but increased in 2020 owing to lower GDP; household debt-to-GDP ratio remains elevated.
- Households’ total net worth nearly 450 percent of GDP; liquid financial assets enough to cover current debt outstanding in aggregate.
- Banks’ exposure to private housing loans slightly declined.
- Quality of housing loans remains strong with declining average loan-to-value (LTV) ratio.

### External sector
- Current account (CA) surplus increased to 17.6 percent of GDP in 2020, led by a large decline in service imports.
- Net international investment position (NIIP) increased to 308 percent of GDP in 2020, led by positive valuation effects and the CA surplus.
- Singapore has a net asset position in portfolio investment and a net liability position in FDI holdings.
- Gross official reserves increased in 2020.
- Financial account recorded net capital inflows in 2020, reflecting lower net outflows of portfolio investment and a shift in “other investment” to a net inflow position.
- Financial outflows from official sector narrowed significantly in 2020.

### Spillovers and external linkages
- Singapore depends mainly on foreign final demand from the EU, China, and the US; Malaysia and Indonesia are important regional partners.
- FDI stocks dominated by Europe and the US and mainly concentrated in finance and insurance sector.
- Large portfolio assets make external balance sheet vulnerable to shocks in the US and regional economies such as China and India.
- Major sources of funding for Singapore’s financial center include East Asian and European banks.
- East Asia is a major user of funds and likely to experience outward spillovers from Singapore in event of banking sector stress in Singapore.
- Cross-border exposures of domestic banks to Greater China and other Asian economies remain near post-GFC highs, exposing Singapore to regional spillover risk.
- FDI to Singapore by Source Country (end 2019) composition includes: U.S. 22 percent; Cayman Islands 9 percent; British Virgin Islands 8 percent; Japan 7 percent; U.K. 5 percent; Netherlands 2 percent; Others 35 percent; Other EU 12 percent.

### Demographic transition
- Old-age dependency projected to increase significantly in the medium to long term.
- Singapore’s aging speed is among the highest in the region and advanced economies.
- Labor force participation rate has risen in recent years, particularly for the elderly and women in prime working age; scope for further rise for prime working age women.
- Average number of children per woman among the lowest in the world.
- Resident labor force participation rate by gender and age shown for 2002, 2008, 2020.

### Social and equality indicators
- Average monthly earnings continue to increase steadily.
- Median wages for high-skilled workers continued to decline in 2020, while median wages for mid- and low-skilled workers held up.
- Median household income declined in 2020.
- Real incomes of lower income groups increased faster in 2010−2020 relative to 2000−2010.
- Inflation turned negative in all income groups in 2020, helping real income.
- Government policies (taxes and benefit payments) contributed to a reduction in inequality in 2020.
- Average Monthly Real Household Income by Decile (2000 and 2020): Total cumulative change 72.9 percent; 1st-10th: 26.8 percent; 11th-20th: 51.5 percent; 21st-30th: 66.9 percent; 31st-40th: 70.9 percent; 41st-50th: 73.7 percent; 51st-60th: 75.0 percent; 61st-70th: 76.3 percent; 71st-80th: 77.4 percent; 81st-90th: 87.8 percent; 91st-100th: 82.3 percent.
- Memo: Top dec/bottom dec = 18.4 (2000), 26.5 (2020).
- Gini indices series shown: US: Gini for all households and SGP: Household Gini (before taxes) and (after taxes) 1990–2020 (index values listed).

### Key macroeconomic indicators and projections (selected figures from Table 1 and projections)
- Nominal GDP (2020): US$340 billion
- Population (2020): 5.69 million
- Real GDP growth: 2019 = 1.3; 2020 = -5.4; 2021 = 6.0; 2022 = 3.1
- Total domestic demand growth: 2019 = 1.7; 2020 = -10.7; 2021 = 5.3; 2022 = 3.1
- Private consumption growth: 2019 = 3.3; 2020 = -14.1; 2021 = 5.6; 2022 = 3.1
- Gross fixed investment growth: 2019 = 1.2; 2020 = -13.7; 2021 = 6.0; 2022 = 3.4
- CPI inflation (period average): 2019 = 0.6; 2020 = -0.2; 2021 = 1.4; 2022 = 1.4
- MAS core inflation: 2019 = 1.0; 2020 = -0.2; 2021 = 0.8; 2022 = 1.4
- Unemployment rate (period average): 2019 = 2.3; 2020 = 3.0; 2021 = 2.7; 2022 = 2.5
- Central government net lending/borrowing (percent of GDP): 2019 = 3.8; 2020 = -5.7; 2021 = -2.4; 2022 = 1.4
- Primary balance (percent of GDP): 2019 = -1.9; 2020 = -11.1; 2021 = -8.4; 2022 = -4.3
- Broad money (M2) growth (end of period): 2019 = 4.4; 2020 = 10.7; 2021 = 5.0; 2022 = 4.5
- Current account balance (US$ billions): 2019 = 53.4; 2020 = 59.8; 2021 = 59.1; 2022 = 59.8
- Current account as percent of GDP: 2019 = 14.3; 2020 = 17.6; 2021 = 15.5; 2022 = 14.9
- Gross official reserves (US$ billions): 2019 = 279.5; 2020 = 362.3; 2021 = 390.8; 2022 = 407.5
- NIIP in percent of GDP: 2020 = 308 percent
- 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); 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); USA (10.5 percent).

### Balance of payments and external asset/liability positions (selected figures)
- Current account balance (US$ billions): 2015 = 57.6; 2016 = 56.0; 2017 = 59.3; 2018 = 57.9; 2019 = 53.4; 2020 = 59.8; 2021 = 59.1; 2022 = 59.8.
- Goods balance (US$ billions): 2020 = 93.6; Exports, f.o.b. (2020) = 411.6; Imports, f.o.b. (2020) = -318.0.
- Services balance (2020) = 14.9 (US$ billions).
- Primary income balance (2020) = -41.6 (US$ billions).
- Financial account (net) (2020) = -14.4 (US$ billions).
- Overall balance (2020) = 74.9 (US$ billions).
- External assets (2020) = 4,628 (US$ billions); External liabilities (2020) = 3,581 (US$ billions); Net international investment position (2020) = 1,047 (US$ billions) = 308 percent of GDP.

### Monetary, credit, and vulnerability indicators (selected)
- Monetary survey (M2 end of period, in billions of S$): 2020 M2 = 1,031; 2021 projection = 1,104; 2022 projection = 1,153.
- Net foreign assets (2020) = 724 (S$ billions).
- Domestic credit (2020) = 1,019 (S$ billions).
- Financial vulnerability indicators (2015–2020): Private sector credit growth (y/y) 2020 = 1.4 percent; Broad money (M2) growth 2020 = 10.7 percent; NPL ratio (local banks, latest available 2020) = 1.6 percent; Capital adequacy ratio of local banks (latest available 2020) = 16.7 percent.
- Real estate: Private residential (end of period) 2020 = 2.2 percent (y/y end of period).

### Fiscal operations and government balance sheets (selected)
- Statement of government operations (FY2019 and related series):
  - Revenue (FY2019, in billions S$) = 91.5; Expense = 64.4; Net lending/borrowing = 19.7 (in billions S$).
  - Revenue (percent of GDP FY2019) = 18.0; Expense = 12.7; Net lending/borrowing = 3.9 (percent of GDP).
  - Net investment returns contribution (NIRC) (FY2019, in billions S$) = 17.0; NIRC (percent of GDP FY2019) = 3.3.
- Gross financial assets (end-March): 2019 = 1,349 (S$ billions); Gross debt (end-March): 2019 = 656 (S$ billions).
- Gross debt (in percent of GDP) 2019 = 129 percent; 2020 = 155 percent (FY2020 figures shown).

*International Monetary Fund staff compilation from the source content provided.*

### Appendix I. Household Consumption Dynamics Around Shocks

### Appendix I. Household Consumption Dynamics Around Shocks

### Consumption dynamics during pandemics vs ordinary recessions
- Each 1 ppt decline in GDP growth was associated with a decline in consumption growth by about 1 ppt during major pandemic years, compared to about 0.7 ppt decline during ordinary economic slowdowns (average among advanced economies in 1980-2018).
- Stronger contraction in consumption during pandemics reflects:
  - containment measures limiting spending opportunities, and
  - heightened health risks weighing on consumer sentiment.
- Pandemics with higher infection and mortality rates are associated with a sharper decline in consumption.
- Private consumption in Singapore contracted by a record 14 percent in 2020.

### Recovery patterns and persistence
- The recovery in consumption tends to be more sluggish than the recovery in income.
- After the initial decline, the impulse response of consumption growth to a GDP growth shock remains negative for a couple more years—reflecting sluggish recovery in consumer confidence that tends to lag business confidence.
- Given remaining uncertainties and lingering health risks, the recovery in consumption growth going forward could be gradual.

### Singapore-specific structural factors affecting consumption
- Singapore has on average a relatively low share of consumption in national income and a high saving rate.
- Structural factors identified in regression analysis (AEs, 1980-2019) that affect Singapore’s consumption level include:
  - A significant share of national income paid to compensate foreign factors of production and a low labor share in income—implying consumption as a share of national income likely underestimates Singaporean household propensity to consume.
  - High per capita income and purchasing power, usually associated with a low consumption share in income.
  - A population that is young but aging rapidly, giving households more room to withhold current consumption and more need to save for old-age consumption.
- Household expenditure composition differences (Singapore vs U.S. and U.K.):
  - Singaporean households spend significantly less on housing and transportation, likely reflecting policies that make public housing and transportation widely available.
  - Other social factors, such as a strong bequest motive, may affect consumption but are difficult to quantify.

### Structural drivers that mitigate consumption compression in crises
- Cross-economy analysis suggests consumption declines less in crises for economies with higher income, such as Singapore.
- Demographics: consumption compression is greater in economies with a younger population; however, compression is smaller in a faster-aging population as saving motives for retirement become less salient during a crisis.
- For Singapore’s young and fast-aging population, staff analysis suggests the net effect of demographics is to alleviate consumption compression during crises.

### Policy implications and measures to support consumption
- Structural factors that drive higher saving rates in Singapore could help mitigate consumption compression during crises.
- Consumption compression can be further mitigated by policy support. Although consumption collapsed in 2020 despite sizable fiscal support (due to restrictions limiting spending opportunities and heightened uncertainties), measures to support consumption may gain more traction as restrictions are eased.
- Specific policy measures that can support consumption recovery:
  - Income subsidies or cash grants as restrictions are eased and households feel more secure about their income prospects.
  - Continued support for job creation in the recovery phase and maintaining a robust labor market to support near-term recovery in consumption and boost consumption over the medium- to long-term.

*Prepared by Jiae Yoo (APD). See Chapter 1 of Selected Issues for additional details.*

### 3.      The government announced additional measures in May 2021 to mitigate the

### 1sgpea2021001 - 3.      The government announced additional measures in May 2021 to mitigate the

### May 28, 2021 fiscal measures to mitigate Phase-2 (Heightened Alert) impact
- Amount: S$800 million (0.2 percent of GDP).
- Financing: Reallocation from development expenditure within the FY2021 budget.
- Target: Impacted workers, businesses, and individuals.
- Components:
  - Enhanced support under JSS to selected sectors (food and beverage, retail, art, sport, and entertainment).
  - Additional cash payout to eligible individuals and workers (COVID-19 Recovery Grant-Temporary payout and additional payout to taxi and private hire car drivers).
  - Rental support for qualifying tenants of commercial properties.

### Financial sector support measures to individuals and SMEs (Special Financial Relief Programme and subsequent packages)
- SFRP announced on March 31, 2020; measures provided on an opt-in basis.
- Defer Repayment of Residential Property Loans:
  - Defer either (i) principal payments or (ii) both principal and interest payments until December 31, 2020.
  - Interest accrued only on the deferred principal amount; no interest charged on deferred interest payments.
  - Lenders approved deferment if individual was not in arrears for more than 90 days as at April 6, 2020.
  - Individuals did not need to demonstrate any impact from COVID-19 to obtain the deferment.
  - Borrowers were not subject to TDSR when they apply to defer either their principal payment or both principal and interest payments for their residential mortgages.
  - Applies to residential property purchase loans and mortgage equity withdrawals, including those under Debt Reduction Plans; extended to owner-occupied (Housing Development Board and private) and investment properties.
- Lower Interest on Personal Unsecured Credit:
  - Option to convert outstanding balances to term loans at a reduced rate of interest, capped at 8 percent (compared to the 26 percent typically charged on credit cards).
  - Available to individuals who suffered a loss of 25 percent or more of their monthly income after February 1, 2020 and at risk of incurring substantial arrears until December 31, 2020.
- Defer Premium Payments for Life and Health Insurance:
  - Individuals could apply to defer premium payments for up to six months while maintaining insurance coverage during this period.
- Flexible Instalment Plans for General Insurance:
  - Individuals and corporates, including SMEs, holding general insurance policies could request an instalment payment plan while maintaining insurance protection.
- SME loan relief under SFRP:
  - Defer principal payments on SMEs’ secured term loans up to 31 December 2020, subject to lenders’ assessment of the quality of the SMEs’ security.
  - SMEs could extend the tenure of their loans by up to the corresponding principal deferment period.
  - Relief available to SMEs that continued to pay interest and were in good standing with their lenders.

### Second package (April 30, 2020) and Extended Support Scheme (October 2020 / January 2021)
- April 30, 2020 package broadened support to a range of debt obligations, including student debt, motor vehicle loans, and commercial property; loosened TDSR for refinancing of investment property loans.
- Extended Support Scheme (announced October 2020; effective January 2021 for some measures):
  - Individual borrowers furnishing proof of income impact could make reduced monthly instalments pegged at 60 percent of the usual monthly instalments (from 100 percent under previous measures) on their property loans for a period of up to nine months from take-up, though not beyond December 2021.
  - SME borrowers could apply to defer 80 percent (from 100 percent previously) of principal repayment for either three or six months (depending on sector) from January 2021 onwards.

### Take-up and utilization of debt moratoriums and loan schemes
- Individual borrowers applied for moratoriums of approximately S$29 billion of property (mortgage) loans as of December 2020.
  - Property loan amounts subject to moratorium constitute about 14.1 percent of total outstanding property loans.
- SME moratorium approvals:
  - As of December 2020, more than 6,500 applications involving more than S$9.5 billion of SME loans were approved under the first round of measures.
  - As of February 2021, more than 1,300 applications involving more than S$3.8 billion of SME loans were approved under the Extended Support Scheme.
- Government loan support take-up:
  - As of Q3 2020, about S$14.5 billion of loans disbursed to some 18,000 firms were approved under the ESG schemes.
  - Take-up was strong during “Circuit Breaker” (April to June) and moderated from July.

### Government support measures to corporates and SMEs (loan schemes and MAS facility)
- Government actions:
  - Enhanced risk share proportion and loan quantum for loans extended to corporates by FIs under the Enterprise Singapore (ESG) Temporary Bridging Loan Programme and SME Working Capital loan scheme.
  - New MAS SGD facility introduced to provide a low-cost source of funding to FIs to facilitate lending to SMEs under government loan schemes.
  - SMEs and retail borrowers facing temporary cashflow pressures could apply for assistance under the SFRP for selected loan types from March 2020 to December 2020.
- Appendix Table summary (selected figures preserved):
  - Temporary Bridging Loan Programme (March 2020-March 31, 2021):
    - Maximum Loan: S$5 million.
    - Maximum Repayment Period: 5 years.
    - Risk Share: The Government will retain 90 percent risk share.
    - Interest rate: Capped at 5 percent p.a.
    - Extension and modification: Program extended by six months (from April 1 to September 2021).
  - SME Working Capital (April 8-March 31, 2021):
    - Maximum Loan: S$1 million/borrower.
    - Maximum Repayment Period: 5 years.
    - Government risk-share increased to 90 percent (from 50 percent and 70 percent for young companies).
    - Extension and modification: 70 percent government risk share (down from 90 percent previously); Maximum loan quantum of S$3 million per borrower (down from S$5 million previously).
  - SME Trade Loan (April 8-March 31, 2021):
    - Maximum Loan: S$10 million / borrower group.
    - Maximum Repayment Period: 1 year.
    - Government risk-share increased to 90 percent.
    - Borrower responsible to repay 100 percent; standard recovery procedure before claim against Enterprise Singapore in proportion to risk-share.
    - Interest rate: Subject to participating financial institutions assessment of risks involved.

### Regulatory and supervisory relief by MAS
- Encouraged drawing on capital buffers:
  - Banks allowed to recognize more of their regulatory loss allowance reserves as capital.
  - Relief applies until September 30, 2021 and may be extended if necessary.
  - Guidance: Release of capital buffers should not be used to finance share buybacks during this period.
  - Footnote: MAS has allowed the full recognition of regulatory loss allowance reserves (RLAR) as Tier 2 capital.
- Drawing on liquidity buffers:
  - Net Stable Funding Ratio requirement adjusted.
  - Required stable funding factor for loans to non-financial corporates, retail customers and small business customers that are maturing in less than six months halved from 50 percent to 25 percent.
  - Relief applies until September 30, 2021 and may be extended if necessary.
- Accounting loan loss allowances guidance:
  - MAS engaged FIs and accounting professionals on application of accounting standard IFRS(I) 9.
  - FIs should consider extraordinary government measures in assessing COVID-19’s impact on future economic conditions and consequent level of accounting loan loss allowances.
  - FIs were not expected to maintain higher accounting loan loss allowances solely because borrowers took up COVID-19 relief measures; assess borrower’s ability to make full repayment based on revised loan terms and long-term creditworthiness.

### Insolvency and restructuring measures
- COVID Temporary Measures Act (2020), Part 3 (passed April 7, 2020):
  - Temporary six-month relief to businesses and individuals affected by COVID-19.
  - Raised thresholds:
    - Bankruptcy threshold for individuals raised from S$15,000 to S$60,000.
    - Insolvency threshold for businesses raised from S$10,000 to S$100,000.
  - Statutory period to respond to a statutory demand lengthened from 21 days to 6 months.
  - These temporary revisions expired on October 19, 2020.
- Simplified Insolvency Programme (SIP):
  - Announced October 5, 2020; came into effect on January 29, 2021 for six months (subject to extensions by the Minister of Law).
  - Objective: Provide faster and lower-cost proceedings for eligible micro and small companies to restructure debts or wind up.
  - Eligibility definitions preserved from source:
    - Micro and small companies defined as companies with (a) annual sales turnover which does not exceed S$10 million; (b) not more than 30 employees; (c) not more than 50 creditors; (d) liabilities (including contingent and prospective liabilities) which do not exceed S$2 million.
    - For simplified winding up only, the value of realizable assets (not including any asset that is subject to a security arrangement) does not exceed S$50,000.
    - To be eligible for the SIP, a company must also not be involved in any ongoing restructuring or winding up proceedings.

*International Monetary Fund — Singapore staff report content (excerpts as provided).*

### Appendix IV. External Sector Assessment

### Appendix IV. External Sector Assessment

### Overall assessment and policy implications
- Overall Assessment: The external position in 2020 was substantially stronger than what is consistent with fundamentals and desirable policies.
- Key uncertainties: Assessment is subject to a wide range of uncertainty, reflecting Singapore’s very open economy and status as a global trading and financial center.
- Potential Policy Responses:
  - A sizable fiscal policy response to the COVID-19 pandemic has helped reduce external imbalances in 2020.
  - Expected execution of major infrastructure projects should contribute to further reduction of external imbalances in the near term.
  - Over the medium term, Singapore will undergo structural transformation due to a rapidly aging population and transition to a new digital economy, while facing climate change challenges.
  - Higher public investment in health care, physical infrastructure, and human capital would help keep CA imbalances moderate over the medium term by lowering net public saving.
  - Structural reforms are necessary to improve productivity.

### Foreign asset and liability position and trajectory
- Background:
  - NIIP stood at 308 percent of GDP in 2020, up from 208 percent of GDP in 2019 and the average level of 212 percent of GDP in 2015-2019.
  - Gross assets and liabilities are high, reflecting Singapore’s status as a financial center.
  - About half of foreign liabilities is in FDI, and about a quarter is in the form of currency and deposits.
  - The CA surplus has been a main driver since the global financial crisis; valuation effects were material in some years.
  - CA and growth projections imply that the NIIP will rise over the medium term.
  - The large positive NIIP in part reflects the accumulation of assets for old-age consumption, which is expected to be gradually unwound over the long term.
- Assessment:
  - Large gross non-FDI liabilities (508 percent of GDP in 2020)—predominantly cross-border deposit taking by foreign bank branches—present some risks.
  - Risks are mitigated by large gross asset positions, banks’ large short-term external assets, and the authorities’ close monitoring of banks’ liquidity risk profiles.
  - Singapore has large official reserves and other official liquid assets.
- Key 2020 figures (% GDP):
  - NIIP: 307.8
  - Gross Assets: 1361.2
  - Debt. Assets: 617.0
  - Gross Liab.: 1053.4
  - Debt Liab.: 417.6

### Current account (CA)
- Background:
  - CA surplus was 17.6 percent of GDP in 2020, up from 14.3 percent in 2019.
  - Rise led by a large decline in service imports, a narrower oil trade deficit, and a decrease in net payments of primary income related to the COVID-19 shock.
  - CA balance is slightly higher than the average of 16.6 percent since 2015 and significantly lower than the post-global-financial-crisis peak of 22.9 percent in 2010.
  - Singapore’s large CA balance reflects a strong goods balance and small surplus in services, partly offset by an income account deficit.
  - Structural factors and policies that boost savings include Singapore’s status as a financial center, consecutive fiscal surpluses in most years, rapid aging, a mandatory defined-contribution pension program (assets about 98.5 percent of GDP in 2020), and relatively high productivity.
  - CA surplus is projected to narrow over the medium term on the back of increased infrastructure and social spending.
  - In 2020, public saving decreased with a sizable fiscal expansion in response to the pandemic, while private saving increased.
- Assessment (EBA-guided):
  - Staff assesses the 2020 CA gap to be in the range of 1.2-7.2 percent of GDP.
  - The identified policy gaps narrowed significantly to close to zero in 2020 reflecting the sizable fiscal package and an increase in health care expenditure.
- Key 2020 figures (% GDP):
  - CA: 17.6
  - Cycl. Adj. CA: 16.9
  - EBA Norm: —
  - EBA Gap: —
  - COVID-19 Adj.: -1.8
  - Other Adj.: —
  - Staff Gap: 4.2

### Real exchange rate (REER)
- Background:
  - The REER depreciated by 2.6 percent in 2020 reflecting the depreciation of the NEER by 1.2 percent.
  - This followed a depreciation of the REER by 0.3 percent and an appreciation of the NEER by 2.4 percent, both cumulative, between 2017 and 2019.
  - As of April 2021, the REER had appreciated by 0.2 percent relative to 2020 average.
- Assessment:
  - Consistent with the staff CA gap, staff assesses the REER to be undervalued in the range of 2.5 to 14.5 percent, with a midpoint of 8.5 percent in 2020 (applying an estimated elasticity of 0.5).

### Capital and financial accounts: flows and policy measures
- Background:
  - Singapore has an open capital account.
  - As a trade and financial center in Asia, changes in market sentiment can affect Singapore significantly.
  - The financial account balance reflects reinvestment abroad of income from official foreign assets, sizable net inward FDI, and smaller but more volatile net bank-related flows.
  - In 2020, the capital and financial account switched to inflows of 4.2 percent of GDP from outflows of 16.5 percent in 2019 (outflows ranged from 10 to 18 percent in 2015–19).
  - The switch reflected lower net outflows of portfolio investment led by resident banks switching from net outflow in 2019 to net inflow in 2020, and “other investment” turning from net outflow to net inflow among domestic non-banks.
- Assessment:
  - The unusual capital inflows in 2020 are likely to be transitory reflecting regional safe-haven flows and are likely to turn to outflows as the effect of pandemic subsides.

### FX intervention and reserves level
- Background:
  - With the NEER as the intermediate monetary policy target, intervention is undertaken to achieve inflation and output objectives.
  - As a financial center, prudential motives call for a larger NIIP buffer.
  - Official reserves held by the MAS reached US$362 billion (106.6 percent of GDP) in 2020.
  - Aggregate data on foreign exchange intervention operations has been published since April 2020.
- Assessment:
  - In addition to FX reserves held by the MAS, Singapore also has access to other official foreign assets managed by Temasek and GIC.
  - The current level of official external assets appears adequate, even after considering prudential motives, and there is no clear case for further accumulation for precautionary purposes.
- Note: External assets managed by GIC and Temasek amount to at least 70 percent of GDP.

### Risk Assessment Matrix — selected external and domestic risks, likelihood, impact, and recommended responses
- External/Conjunctural risks:
  - Unexpected shifts in the COVID-19 pandemic
    - Likelihood: Medium
    - Expected transmission: Asynchronous progress; limited access or longer deployment of vaccines; potential prolonged pandemic or faster containment scenarios.
    - Expected impact: High
    - Recommended policy response: Fiscal policy remains the first line of defense; space to ease monetary policy if inflation declines; continued temporary and targeted support; maintain prudent risk assessment and enhancements to insolvency regime.
  - Sharp rise in global risk premia exposes financial and fiscal vulnerabilities
    - Likelihood: Medium
    - Expected impact: Medium to High
    - Recommended policy response: Maintain prudent risk management, adequate liquidity and capital buffers, maintain close links with home country supervisors, recalibrate macro-prudential policies, use strong official reserve position as cushion if extreme, maintain swap lines.
- External/Structural risks:
  - Higher frequency and severity of natural disasters related to climate change
    - Likelihood: Medium
    - Expected impact: Low to Medium
    - Recommended policy response: Implement climate change mitigation strategies, enhance preparedness, collect data, and improve inter-agency collaboration.
  - Accelerating de-globalization
    - Likelihood: Medium
    - Expected impact: High
    - Recommended policy response: Continue structural reforms to transform Singapore into a knowledge-based innovation-driven economy; use temporary targeted fiscal stimulus and loosen monetary policy (including re-centering the NEER band if large shock) and recalibrate macro-prudential policy as necessary.
  - Oversupply and volatility in the oil market
    - Likelihood: Medium
    - Expected impact: Medium
    - Recommended policy response: Maintain adequate capitalization, risk management and liquidity buffers in exposed sectors.
  - Cyber-attacks
    - Likelihood: Medium
    - Recommended policy response: Continue assessing IT risk management adequacy, prepare contingency plans, coordinate with global financial regulators, provide temporary targeted emergency liquidity or fiscal support if needed.
- Domestic risks:
  - Disorderly correction in property prices
    - Likelihood: Low
    - Expected impact: Medium
    - Recommended policy response: Adjust macro-prudential policies while safeguarding financial stability; use targeted assistance measures for households with impaired debt servicing capacity.
  - Low growth in productivity and investment
    - Likelihood: Medium
    - Expected impact: Medium
    - Recommended policy response: Adjust foreign worker policies to relax tightness in labor markets; provide targeted and temporary fiscal stimulus in education and skills training.

### Appendix VI — Public Debt Sustainability Analysis (selected findings)
- Overall judgment: Singapore’s public debt is sustainable and large public financial assets are important risk mitigating factors.
- Key contextual points:
  - The unprecedented fiscal support in response to the COVID-19 pandemic and widening of the fiscal deficit did not lead to a substantial accumulation of debt as fiscal measures were financed through a drawdown of public reserves.
  - Singapore is a low scrutiny country in the DSA framework for market access countries.
  - Public debt stood at about 129 percent of GDP as of end of FY2019. All debt is held domestically and issued in local currency.
- Debt issuance and purpose:
  - Debt accumulation in Singapore is unrelated to deficit financing.
  - Fiscal policy is anchored by a fiscal rule enshrined in the Constitution mandating a balanced budget over the 5-year political cycle.
  - Government issues domestic, local-currency debt securities to deepen the domestic debt market, meet investment needs of the Central Provident Fund (CPF), and provide long-term saving options.
  - Borrowing proceeds are not used to fund government expenditures; all proceeds from Government borrowing are invested.
- Macro-fiscal assumptions:
  - Central government net lending/borrowing shifted from a surplus of 1.7 percent of GDP in FY2019 to a deficit of 10.4 percent of GDP in FY2020.
  - Under staff’s baseline projections, it is expected to gradually return to a balanced budget as the economy recovers.
  - Staff’s baseline currently does not include the proposal of raising the Goods and Services Tax (GST) rate between 2022 and 2025.
- Public asset context (from authorities’ disclosures):
  - Government’s gross assets are mainly managed by GIC Private Limited (total undisclosed, but well over US$100 billion or 21 percent of GDP).
  - Government also places deposits with the MAS (8.7 percent of GDP as of March 31, 2020).
  - Temasek’s portfolio was S$306 billion as of March 31, 2020 (65 percent of GDP).
  - The CPF balance as of March 31, 2020 was about 84 percent of GDP.
- Debt projections and financing needs:
  - Debt-to-GDP ratio increased to 155 percent of GDP in 2020, mainly reflecting the interest-growth differential as the economy contracted.
  - The debt level is projected to moderate to 138 percent of GDP in 2021, alongside the economic recovery.
  - Over the medium-term, the debt-to-GDP ratio is projected to increase gradually to about 144 percent of GDP by 2026, reflecting modest rise in investment needs by the CPF as employment growth slows in line with population aging.
  - Gross financing needs (GFN) are expected to average about 22 percent of GDP per annum in the medium term.

*Appendix IV. External Sector Assessment; Appendix VI. Public Debt Sustainability Analysis (selected extracts).*

### 6.      A high level of financial assets mitigates the risks associated with public debt. The

### 6.      A high level of financial assets mitigates the risks associated with public debt. The

### Key mechanism: assets offsetting gross financing needs and NIR framework
- The projected GFN, mostly driven by the CPF’s investment needs, are expected to be mirrored one-for-one with an accumulation of assets by the government.
- Under the Net Investment Returns (NIR) framework, only up to 50 percent of the long-term expected returns earned on net assets (i.e. assets net of interest costs and liabilities) can be used as budget revenue.
- The Net Investment Returns Contribution (NIRC) to the budget comprises up to 50 percent of the expected long-term real returns on the net assets invested by GIC, MAS and Temasek, and up to 50 percent of the investment income from the remaining assets.
- This constraint (up to 50 percent) contributes to asset buildup and helps deliver a sustainable revenue stream.

### Public Debt Sustainability Analysis — baseline projections (selected figures)
- Nominal gross public debt (in percent of GDP):  
  - 2019: 105.1  
  - 2020: 129.0  
  - 2021: 154.9  
  - 2022: 137.9  
  - 2023: 139.0  
  - 2024: 140.2  
  - 2025: 141.4  
  - 2026: 142.6  
  - 2027: 143.9
- Public gross financing needs (in percent of GDP):  
  - 2019: 9.0  
  - 2020: 14.2  
  - 2021: 29.2  
  - 2022: 23.3  
  - 2023: 20.7  
  - 2024: 20.8  
  - 2025: 21.0  
  - 2026: 22.1  
  - 2027: 21.8
- Real GDP growth (in percent):  
  - 2019: 5.0  
  - 2020: 1.0  
  - 2021: -5.1  
  - 2022: 5.8  
  - 2023: 3.6  
  - 2024: 2.8  
  - 2025: 2.4  
  - 2026: 2.5  
  - 2027: 2.5
- Inflation (GDP deflator, in percent):  
  - 2019: 1.3  
  - 2020: -1.5  
  - 2021: -2.5  
  - 2022: 1.4  
  - 2023: 1.4  
  - 2024: 1.5  
  - 2025: 1.5  
  - 2026: 1.9  
  - 2027: 1.9
- Nominal GDP growth (in percent):  
  - 2019: 6.3  
  - 2020: -0.6  
  - 2021: -7.5  
  - 2022: 7.3  
  - 2023: 5.0  
  - 2024: 4.4  
  - 2025: 4.0  
  - 2026: 4.5  
  - 2027: 4.5
- Effective interest rate (in percent):  
  - 2019: 3.0  
  - 2020: 3.5  
  - 2021: 2.8  
  - 2022: 2.8  
  - 2023: 2.6  
  - 2024: 2.7  
  - 2025: 2.8  
  - 2026: 3.0  
  - 2027: 3.1
- Change in gross public sector debt (in percent of GDP):  
  - 2019: 1.1  
  - 2020: 17.1  
  - 2021: 25.9  
  - 2022: -17.0  
  - 2023: 1.2  
  - 2024: 1.2  
  - 2025: 1.2  
  - 2026: 1.2  
  - 2027: 1.2  
  - cumulative (2019–2027): -11.0

### Identified debt-creating flows and automatic dynamics (selected)
- Identified debt-creating flows (in percent of GDP):  
  - 2019: -11.3  
  - 2020: -3.2  
  - 2021: 19.3  
  - 2022: -10.3  
  - 2023: -8.6  
  - 2024: -8.0  
  - 2025: -7.7  
  - 2026: -7.7  
  - 2027: -8.3  
  - cumulative (2019–2027): -50.5
- Primary deficit (in percent of GDP) (primary balance defined as net lending/borrowing minus interest payments):  
  - 2019: -8.1  
  - 2020: -7.8  
  - 2021: 4.9  
  - 2022: -3.8  
  - 2023: -5.4  
  - 2024: -5.7  
  - 2025: -6.1  
  - 2026: -5.6  
  - 2027: -6.4  
  - cumulative (2019–2027): -33.1
- Revenue and grants (in percent of GDP):  
  - 2019: 17.5  
  - 2020: 18.0  
  - 2021: 17.6  
  - 2022: 19.0  
  - 2023: 18.5  
  - 2024: 18.0  
  - 2025: 17.6  
  - 2026: 17.4  
  - 2027: 17.3  
  - cumulative (2019–2027): 107.8
- Primary (noninterest) expenditure (in percent of GDP):  
  - 2019: 9.3  
  - 2020: 10.2  
  - 2021: 22.5  
  - 2022: 15.3  
  - 2023: 13.1  
  - 2024: 12.3  
  - 2025: 11.5  
  - 2026: 11.8  
  - 2027: 10.8  
  - cumulative (2019–2027): 74.7
- Automatic debt dynamics (in percent of GDP):  
  - 2019: -3.2  
  - 2020: 4.6  
  - 2021: 14.4  
  - 2022: -6.5  
  - 2023: -3.2  
  - 2024: -2.2  
  - 2025: -1.5  
  - 2026: -2.0  
  - 2027: -1.9  
  - cumulative (2019–2027): -17.4
- Real interest rate contribution (in percent of GDP):  
  - 2019: 1.6  
  - 2020: 5.7  
  - 2021: 7.3  
  - 2022: 1.9  
  - 2023: 1.5  
  - 2024: 1.5  
  - 2025: 1.7  
  - 2026: 1.4  
  - 2027: 1.5  
  - cumulative (2019–2027): 9.6
- Real GDP growth contribution (in percent of GDP):  
  - 2019: -4.8  
  - 2020: -1.1  
  - 2021: 7.1  
  - 2022: -8.4  
  - 2023: -4.7  
  - 2024: -3.8  
  - 2025: -3.3  
  - 2026: -3.4  
  - 2027: -3.4  
  - cumulative (2019–2027): -27.0
- Residual, including asset changes (in percent of GDP):  
  - 2019: 12.4  
  - 2020: 20.3  
  - 2021: 6.6  
  - 2022: -6.7  
  - 2023: 9.7  
  - 2024: 9.1  
  - 2025: 8.9  
  - 2026: 8.9  
  - 2027: 9.6  
  - cumulative (2019–2027): 39.5

### Composition of public debt and alternative scenarios (underlying assumptions)
- Baseline underlying assumptions (selected, in percent):  
  - Real GDP growth: 2021: 5.8, 2022: 3.6, 2023: 2.8, 2024: 2.4, 2025: 2.5, 2026: 2.5  
  - Inflation: 2021: 1.4, 2022: 1.4, 2023: 1.5, 2024: 1.5, 2025: 1.9, 2026: 1.9  
  - Primary Balance: 2021: 3.8, 2022: 5.4, 2023: 5.7, 2024: 6.1, 2025: 5.6, 2026: 6.4  
  - Effective interest rate: 2021: 2.8, 2022: 2.6, 2023: 2.7, 2024: 2.8, 2025: 3.0, 2026: 3.1
- Historical scenario and Constant Primary Balance scenario assumptions are reported as alternative paths (values preserved in source).
- Composition details show public debt by maturity (short-term; medium and long-term) and by currency (local currency-denominated; foreign currency-denominated) across years 2010–2026 (figures presented in original).

### Role of domestic issuance and CPF investment needs
- Domestic debt securities are issued to meet investment needs of Central Provident Fund, to deepen domestic debt market, and provide long-term savings option.
- Residual in the DSA includes debt accumulation unrelated to government's fiscal needs and, for projections, includes asset changes and interest revenues (if any).

### Ancillary analytical notes and definitions (selected)
- Public sector is defined as central government.
- Effective interest rate is defined as interest payments divided by debt stock (excluding guarantees) at the end of previous year.
- Primary balance is defined here as net lending/borrowing minus interest payments.
- Automatic debt dynamics formula and decomposition explained in footnotes (r = interest rate; π = growth rate of GDP deflator; g = real GDP growth rate; a = share of foreign-currency denominated debt; e = nominal exchange rate depreciation).
- Exchange rate depreciation contribution is derived as ae(1+r).
- Projections assume key variables remain at the level of the last projection year for certain stress illustrations.

*Source: IMF staff.*

### 1.      The infrastructure for e-payments in Singapore

### The infrastructure for e-payments in Singapore

### Evolution of e-payments infrastructure
- Fast and Secure Transfers (FAST) instant payment introduced in 2014 enabling real-time electronic funds transfer in Singapore dollars.
- PayNow — a peer-to-peer transfer service running on top the FAST system — introduced in 2017 and enables instant digital payments between accounts using mobile numbers, national identification numbers, or a unique entity number.
- Use of e-payments accelerated over the past five years.

### Pandemic-era developments and usage patterns
- The use of real-time e-payments increased sharply during the pandemic.
- Despite the economic contraction in 2020, the growth rate of FAST e-payments increased by 60 percent.
- ATM withdrawals declined: the volume of cash withdrawals per month in Singapore has fallen sharply owing to movement restrictions.
- Cash use remains entrenched in Singapore despite recent growth in e-payments.

### Empirical findings on cash demand
- An empirical analysis across a sample of advanced and emerging market economies finds:
  - The average age of the population is positively related to the demand for cash.
  - GDP per capita is a significant explanatory variable for cash in circulation.
  - Measures of digitalization, the interest rate (the cost of holding cash), and macroeconomic uncertainty are not significant explanatory variables.

### Government objectives and policy measures
- The government aims to increase the use of e-payments.
- Policies to further enhance the e-payments infrastructure include:
  - (i) building an inclusive e-payment infrastructure to ensure vulnerable segments of the population have access to e-payments services;
  - (ii) introducing common standards to provide interoperability and competition;
  - (iii) collaboration among policy makers, both domestically and internationally.

*Source: 1sgpea2021001 - 1.      The infrastructure for e-payments in Singapore*

### 3.1 Singapore’s macroeconomic policy mix has been carefully formulated to take into

### 1sgpea2021001 - 3.1 Singapore’s macroeconomic policy mix has been carefully formulated to take into

### Monetary Policy
- MAS continued with its accommodative monetary policy stance in April 2021.
- Exchange rate policy band:
  - maintained at a zero percent rate of appreciation;
  - the width of the band and level at which it was centred was kept unchanged.
- Rationale:
  - Singapore’s economic recovery expected to remain uneven and incomplete as global prospects gradually improve.
  - Pandemic path domestically and abroad remains uncertain.
  - Underlying inflation is rising gradually from low levels; risk of persistent disinflation has receded but core inflation remains below its historical average.
  - The current policy stance is assessed as appropriate for now.
- Flexibility:
  - Policy band provides flexibility to accommodate orderly movements of the exchange rate in response to near-term economic uncertainty.

### Fiscal Policy
- Role and basis:
  - Fiscal policy played a key role in mitigating the impact of COVID-19 on businesses, workers and households.
  - Enabled by successive terms of prudent accumulation and management of reserves during normal times.
- Budget 2021 approach:
  - Struck a balance between cushioning vulnerable households/sectors and securing longer-term growth.
  - Shifted from broad-based emergency support to targeted assistance (extending the Jobs Support Scheme and sector-specific support packages; providing cash transfers and temporary unemployment benefits).
  - Sizeable share allocated to investments in physical and human capital to build a more resilient, digital, innovative and greener post-COVID economy.
- Current stance and contingency:
  - Fiscal policy stance estimated to remain expansionary this (calendar) year.
  - Combined with disbursements/effects of Budget 2020, fiscal policy is a key factor supporting recovery this year.
  - Authorities ready to provide quick support should conditions take an unexpected and significant turn for the worse.
  - Following Singapore’s entry into Phase 2 (Heightened Alert) and Phase 3 (Heightened Alert) from 16 May to 13 June and from 14 June onwards respectively, enhanced targeted support measures introduced for firms in directly affected sectors; some tapering of support to account for firm adaptation.
- Medium- to long-term planning:
  - Government will continue to review fiscal position and plan for necessary revenue measures.
  - Projected pressures:
    - Healthcare spending alone would raise government expenditure by 0.8%-point of GDP in 2026–30, in addition to further pressure on other social spending and security needs.
  - Response to development expenditure:
    - For anticipated hump of development expenditure, government will borrow for and capitalise major, long-term infrastructure assets to spread fiscal cost over several generations.

### Financial Sector Policies
- Balance sheet resilience:
  - Corporate and household balance sheets were relatively resilient entering 2020.
  - COVID-19 led to fall in corporate earnings and household incomes, but balance sheet risks and debt servicing burdens remain manageable.
- Property markets:
  - Private residential market characterised by healthy demand-supply going into the crisis due to earlier macroprudential measures.
  - Commercial property: office and retail prices worsened year-on-year due to reduced demand; vacancy rates moderated from 2020 peak levels, suggesting some signs of recovery.
- Policy assessment:
  - Authorities agree with Staff that decisive fiscal and financial policy measures eased financial conditions and facilitated credit flow to businesses and households.
  - Firms maintained healthy liquidity buffers despite rising corporate debt levels.
  - Refinancing risks decreased with earnings expected to improve alongside gradual pick-up in activity.
  - Housing market weathered the pandemic well notwithstanding significant risks of large price swings.
  - Existing macroprudential measures (including the Additional Buyer’s Stamp Duty) remain important tools to address these risks.

### Medium-Term Issues
- Structural priorities:
  - Authorities taking steps to confront opportunities and challenges from technological advancements, demographic shifts and climate change; aim to equip businesses and workers with future-ready capabilities.
  - Anticipate a post-COVID shift from physical to digital transactions and greater focus on intangible assets (knowledge, networks, data).
  - Support for business innovation, competitiveness, and deeper global/regional partnerships, including regional collaboration in innovation platforms and infrastructure investments.
- Demographics and fiscal implications:
  - Population census 2020: share of residents aged 65 and over rose from 9.0% in 2010 to 15.2% in 2020.
  - Old-age dependency ratio almost doubled over the same period to 23.4 and will increase further.
  - Total fertility rate remains low at 1.1.
  - Government healthcare spending will continue to outstrip GDP growth as ageing intensifies.
  - Increased pressure on government resources also reflects climate change adaptation infrastructure and public transportation enhancements being ramped up.
  - As household savings (estimated to account for the largest proportion of Singapore’s savings-investment balance) begin to taper, these factors will contribute to anticipated medium-term adjustments in the external balance position.
- Labour market and skills:
  - Active labour market policies focus on participation and improving job-worker match efficiency.
  - COVID-19 accelerated structural employment changes; emphasis on programmes to equip workers with industry-relevant skills.
  - Initiatives beyond JSS and SGUnited Jobs and Skills Package include developing skills and creativity; example: Innovation & Enterprise Fellowship Programme to support leaders in deep technology areas such as cybersecurity, artificial intelligence and health technology.
  - Authorities welcome Staff’s documentation of Singapore’s comprehensive labour market policies in the Selected Issues Papers.
- Climate and green finance:
  - Authorities aware of intensifying climate risk and need for coordinated global response.
  - Steps taken: diesel tax restructuring in 2017; carbon tax introduction in 2019; enhancement of Singapore’s 2030 Nationally Determined Contribution; Long-Term Low-Emissions Development Strategy in 2020; further measures include infrastructure development, tax changes to discourage internal combustion vehicle use, and R&D for sustainable environments.
  - MAS efforts to grow and mainstream green finance:
    - Singapore’s green finance markets accounted for about 40% of ASEAN green loan originations and bond issuances in 2020.
    - Green Finance Action Plan initiatives: strengthen financial sector resilience to environmental risks; develop green and sustainable solutions tailored for Asia; enhance reliability and comparability of sustainability-related disclosures; build knowledge and capabilities in sustainable finance; harness technology to enable trusted and efficient finance flows.

### Final Remarks
- Monitoring and readiness:
  - Amid elevated uncertainties over COVID-19 evolution and recovery path, authorities will carefully monitor global and domestic developments and assess implications for internal balance (macroeconomic and financial stability).
  - Authorities stand ready to undertake appropriate policy responses should conditions deteriorate more sharply than anticipated.
- Commitment:
  - While focusing on recovery, authorities remain committed to longer-term domestic restructuring to embrace new economic opportunities.
- Publication consent:
  - Authorities agree to the publication of the 2021 Singapore Article IV Consultation Report.

*Source: 1sgpea2021001 - 3.1 Singapore’s macroeconomic policy mix has been carefully formulated to take into (PDF chapter).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2021/english/1sgpea2021001.pdf_