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### Recent economic developments
- Growth moderated to 1.1 percent in 2023 from 3.8 percent in 2022, mainly due to a contraction in manufacturing in 2023H1.
- A small negative output gap of -0.4 percent was estimated to have emerged in 2023.
- Growth accelerated to 2.2 percent (year-on-year) in 2023Q4 from 0.5 percent in 2023H1.
- Growth rose to 2.7 percent (year-on-year) in 2024Q1, at a seasonally adjusted annualized quarter-on-quarter rate of 0.2 percent, supported by strong inbound tourism.
- Goods exports decreased by 10.1 percent in 2023; total merchandise exports rose by 4.4 percent in 2024Q1.
- Goods and services imports declined by 13.4 percent and 2.4 percent, respectively, in 2023.
- Private residential property prices increased by 4.9 percent (year-on-year) in 2024Q1, decelerating from the 11.4 percent increase observed in 2023Q1.
- Transaction volumes in housing moderated during 2023.

### Inflation, disinflation, and monetary policy
- Headline inflation peaked at 7.5 percent (year-on-year) in September 2022 and declined to 2.7 percent in April 2024.
- MAS core inflation (excludes costs of accommodation and private transport but includes food and energy) decreased from a peak of 5.5 percent in January 2023 to 3.1 percent in April 2024.
- Two-year ahead inflation expectations based on consensus forecasts have been well-anchored at around 1.8 percent.
- Both headline and MAS core inflation are projected to moderate to 3 percent in 2024.
- MAS core inflation is expected to stabilize at around 2 percent by 2025.
- MAS operates a basket, band, and crawl (BBC) exchange rate framework and tightened policy from October 2021–October 2022; policy settings have been unchanged since then.
- Recommendation: monetary policy should remain tight until inflationary pressures firmly recede; if upside inflation risks materialize, the monetary policy stance should be tightened; once disinflation is firmly in sight, policy should be adjusted timely and clearly communicated.
- MAS maintained the prevailing rate of appreciation of the S$NEER policy band in January and April 2024 with no change to the width or center.

### Labor market and price pressures
- Unemployment rate was 1.9 percent in 2023 and 2.1 percent in 2024Q1.
- Nominal wage growth slowed from 7.8 percent in 2022Q1 to 2.6 percent in 2023Q4, then rose to 6.4 percent in 2024Q1.
- Job vacancy to unemployed persons ratio was 1.7 in 2023Q4, exceeding the pre-pandemic level.
- Signs of persistent services inflation remain, particularly for healthcare and food services.

### Fiscal stance, policy measures, and projections
- Fiscal balance recorded a surplus of 0.8 percent of GDP in FY2023, after a fiscal deficit averaging 0.7 percent of GDP in FY2021–22.
- GST rate increased from 7 to 8 percent in January 2023 and to 9 percent in January 2024.
- Carbon tax rate increased from S$5 per tonne to S$25 per tonne in January 2024.
- The FY2024 Budget implies a surplus of 0.2 percent of GDP and a broadly neutral fiscal stance.
- Cyclically adjusted fiscal balance excluding land sales estimated to be a surplus of 0.8 and 0.2 percent of potential GDP in FY2023 and FY2024, respectively.
- Fiscal space: government owns financial assets (net of government debt) amounting to 95 percent of GDP as of end-March 2023.
- FY2024 targeted measures:
  - GST Voucher Fund topped up by S$6 billion (0.8 percent of GDP).
  - Assurance Package enhanced by S$1.9 billion (0.3 percent of GDP).
  - Enterprise support package of S$1.3 billion (0.2 percent of GDP).
- Staff estimate: total healthcare spending could rise from 4.2 percent of GDP in 2015 to 8.6 percent of GDP in 2050.
- Recommendation: continue fiscal spending to address medium- and long-term challenges within Singapore’s balanced-budget rule; a slower pace of fiscal surplus accumulation would be warranted.

### Financial sector structure, resilience, and vulnerabilities
- Financial system structure in 2021 (assets in percent of GDP, Text Table): Banks 597.8; Central Bank 108.7; NBFIs 340.1; Total 1046.6.
- Banking sector comprises nearly 60 percent of total financial sector assets and shows ample capital buffers, sound asset quality, high profitability, and comfortable liquidity.
- Non-bank financial institutions (NBFIs), mainly investment funds and insurers, have weathered high interest rate stresses well.
- Household debt around 55 percent of GDP in 2023; corporate debt around 130 percent of GDP in 2023.
- Private sector credit declined throughout 2023, then recovered to 0.8 percent (year-on-year) in April 2024.
- Corporate sector NPLs remained low at around 2 percent in 2023; SME NPL ratio remained around 3 percent.
- Total provisioning coverage of the banking sector is 110 percent as of 2023Q3.
- Financial sector faces pockets of vulnerabilities: banks’ cross-border and FX exposures, a small segment of highly leveraged corporates and households, and linkages between fast-evolving NBFIs and banks.

### Financial stability assessment, stress tests, and macroprudential stance
- Overall: Risks to financial stability remain contained with solid capital and liquidity buffers.
- D-SIBs stress test (2023) adverse scenario (3-year horizon): D-SIBs can maintain capital adequacy above regulatory requirements, although capital adequacy declines by nearly 5 percentage points during the stress horizon; second-order solvency-liquidity feedback loop indicates additional capital depletion of around 1 percentage point per year.
- MAS NFC stress tests (2023): 15 percent of listed NFCs would face viability concerns under a stress scenario after utilizing liquidity buffers; these corporates hold around 8 percent of total corporate sector debt.
- MAS household stress tests: debt servicing ability manageable under an immediate mortgage rate increase and negative income shock; a small segment of highly leveraged borrowers account for less than 5 percent of system-wide mortgage loans.
- Risks: persistently high interest rates and CRE risks; banks’ CRE loan exposure exceeds 15 percent.
- Macroprudential measures and settings:
  - Loan-to-value ratio: currently at 15-75 percent differentiated by borrower characteristics.
  - Total debt servicing ratio (TDSR): 55 percent.
  - Banks’ total property-related exposures cap: 35 percent of eligible assets.
  - Countercyclical capital buffers (CCyB): 0 percent.
- Recommendation: maintain tight macroprudential policy stance; phase out residency-based differentiation from April 2023 ABSD increases gradually once systemic risks dissipate.

### Nonbank financial intermediation, asset management, and insurance
- Assets under management quadrupled since 2010 and stood at about US$3.7 trillion in 2022.
- Alternative investment segment grew five times since 2010.
- At end-2022, about 1,200 regulated fund management companies and more than 250 fund services providers.
- By October 2023, 969 Variable Capital Companies (VCCs) incorporated/re-domiciled, representing 1,995 sub-funds.
- By December 2023, 1,400 single family offices awarded tax incentives.
- About 76 percent of funds were sourced from abroad in 2022; 88 percent of total assets under management were invested outside Singapore in 2022.
- Investment funds and trust companies account for about 13 percent of domestic financial system assets.
- Banking system exposure to all NBFIs is less than 15 percent of total bank credit assets.
- MAS initiatives: liquidity risk management requirements for asset managers, 2023 liquidity stress simulation for funds, retail fund leverage limits, framework for designating D-SIIs (effective January 2024).

### Digital innovation, payments, and crypto-related regulation
- Bilateral cross-border instant interoperable QR payment linkages expanded in Asia; usage growing.
- MAS sees no immediate need for retail CBDC but plans wholesale CBDC pilot for atomic settlement across domestic banks.
- Nineteen Digital Payment Token (DPT) service providers licensed as of May 2024.
- MAS expanded regulatory measures for DPT services; working on legislative amendments for stablecoins regulatory framework applicable to single currency stablecoins issued in Singapore and pegged to the Singapore dollar or any G10 currency.
- MAS released an open-source toolkit in 2023 to promote responsible AI use in finance.
- Recommendation: continue emphasis on safety and soundness, reassess cybersecurity landscape regularly, and adjust strategies and guidelines timely.

### AML/CFT assessment and recommendations
- Recent money laundering case involved illegally acquired assets worth US$2 billion, indicating scope for further improvement on analysis of cross-border money laundering risks.
- Recommendations:
  - Strengthen preventive measures for non-resident customers: customer due diligence, beneficial ownership checks, transaction monitoring, and swift reporting of suspicious transactions.
  - Increase supervisory oversight of banks; consider targeted thematic inspections on wealthy nonresident customers.
  - Deepen analysis of impact of financial integrity events on financial stability and associated flows.
- MAS launched COSMIC, a centralized digital platform to facilitate customer information sharing among financial institutions related to AML/CFT.

### External position, REER, and reserves
- Current account surplus rose to 19.8 percent of GDP in 2023 (from 18.0 percent in 2022).
- Staff assess the CA gap to be in the range of 5.2–8.8 percent of GDP (after adjustments); staff-estimated CA gap midpoint 7.0 percent.
- Real effective exchange rate (REER) appreciated by 7.2 percent in 2023 relative to 2022.
- NIIP: 171.4 percent of GDP in 2023; Gross Assets: 1,122.3 percent of GDP; Gross Liabilities: 950.9 percent of GDP; Res. Assets: 70 percent of GDP; Debt Liab.: 326.9 percent of GDP.
- Official reserves held by MAS reached US$351 billion (70 percent of GDP) at end-2023.
- Assessment: current level of official external assets appears adequate; no clear case for further accumulation for precautionary purposes.

### Growth outlook, projections, and key macro numbers
- Real GDP growth projected to recover to 2.1 percent in 2024 from 1.1 percent in 2023.
- Growth projected to reach 2.7 percent (year-on-year) in 2024H1, moderate in 2024H2.
- Small negative output gap in 2023 expected to close by around 2025.
- Over the medium term, growth projected to converge gradually to 2.5 percent.
- Selected projections and aggregates:
  - Nominal GDP (2023): US$501.4 billion.
  - GDP per capita (2023): US$84,734.
  - Population (2023): 5.9 million.
  - Real GDP growth: 3.5 (2018), 1.3 (2019), -3.9 (2020), 9.7 (2021), 3.8 (2022), 1.1 (2023), projections 2.1 (2024), 2.3 (2025).
  - CPI inflation (period average): 6.1 (2022); 4.8 (2023); projections 3.0 (2024), 2.5 (2025).
  - MAS core inflation (period average): 4.1 (2022); 4.2 (2023); projections 3.0 (2024), 2.0 (2025).
  - Unemployment rate: 2.1 (2022); 1.9 (2023); projected 1.9 (2024, 2025).
  - Gross official reserves (US$ billions): 287.7 (2018), 279.5 (2019), 362.3 (2020), 417.9 (2021), 289.5 (2022), 351.0 (2023); projections 396.1 (2024), 449.0 (2025).

### Risks to the outlook
- Growth risks mainly external: key downside risk is a steeper than projected slowdown in China.
- Other risks: prolonged tight U.S. monetary policy leading to abrupt U.S. financial and real estate corrections; geopolitical conflicts and geoeconomic fragmentation (GEF); supply chain disruptions; short-term capital flow shifts.
- Technological change: AI could boost productivity but disrupt labor markets via substitutability.
- Climate change: rising sea levels pose longer-term growth threat.
- Inflation risks tilted to the upside due to tight labor market conditions, accumulated cost pressures from high wage growth, and geopolitical-induced energy and food price volatility.

### Housing market specifics
- Housing market cooled moderately since 2023; private residential prices up 4.9 percent y-o-y in 2024Q1 versus 11.4 percent in 2023Q1.
- Contributing easing factors: high mortgage rates, hike in stamp duties in April 2023, increase in supply of private residential units.
- Significant divergence in price growth across regions; commercial real estate recovery remains lackluster.
- Singapore’s credit-to-GDP gap estimated around negative 30 percent as of 2023.
- Share of private housing purchases attributable to non-residents doubled from 3-4 percent during the pandemic to about 7 percent in 2023Q1; share by transaction volumes rose to 13 percent in 2023Q1.

### Forward Singapore: policy priorities and fiscal implications
- Forward Singapore aims to renew social compact across education, healthcare, housing, social insurance and assistance, labor market policies, and fiscal policy management.
- FY2024 budget includes about S$5 billion (0.7 percent of GDP) in spending measures related to Forward Singapore.
- About S$40 billion (5.6 percent of FY2024 GDP) expected to be spent on related measures by FY2030.
- Demographics: about 1 in 4 Singaporeans projected to be over 65 by 2030; total fertility rate 0.97 in 2023.
- Key Forward Singapore measures and spending:
  - Majulah Package lifetime cost S$8.2 billion (1.2 percent of FY2024 GDP).
  - Top up to Edusave Endowment Fund with S$2 billion (0.3 percent of GDP).
  - SkillsFuture and lifelong learning enhancements; SkillsFuture Level-Up Program for mid-career workers aged 40 and above.
  - Financial support scheme for the involuntarily unemployed (parameters to be announced).
- Recommendation: carefully calibrate support schemes to minimize disincentives and integrate active labor market programs.

### Climate, energy, and sustainability actions
- Carbon tax current rate S$25 (US$19) per tonne of CO2 emission (January 2024); government committed to increase to S$45 (US$33) per tonne in 2026 and to S$50-80 (US$37-59) by 2030.
- International Carbon Credit Framework allows offset up to 5 percent of taxable emissions (implemented January 1, 2024).
- FY2024 Budget allocates S$5 billion (0.7 percent of GDP) to the Future Energy Fund.
- Government aims to issue S$35 billion (4.9 percent of FY2024 GDP) in green bonds by 2030; first sovereign green bond S$2.4 billion issued in August 2022.
- Mandatory climate disclosure requirements for listed firms by 2025, and for large non-listed firms by 2027.

### External Sector Assessment (Annex I) — selected points
- Overall Assessment: external position in 2023 was substantially stronger than level implied by medium-term fundamentals and desirable policies.
- Staff assess the REER to be undervalued in the range of 10.4 to 17.6 percent, midpoint 14.0 percent in 2023 (elasticity 0.5).
- Staff adjustments lead to staff-estimated CA gap of about 7.0 percent of GDP.
- FX intervention and reserves: official reserves US$351 billion (70 percent of GDP) in 2023; external assets managed by GIC and Temasek amount to at least 100 percent of GDP.

### Sovereign risk and debt sustainability (Annex IV) — selected figures and assessment
- Final assessment: overall risk of sovereign stress is low.
- Public debt-to-GDP: about 174 percent of GDP at end-FY2023.
- Public debt (selected projected series, percent of GDP):
  - Actual 2023: 174.3
  - 2024: 175.1
  - 2025: 175.8
  - 2026: 176.4
  - 2027: 177.1
  - 2028: 177.8
  - 2029: 178.3
  - 2030: 178.7
  - 2031: 179.2
  - 2032: 179.6
  - 2033: 180.1
- Primary deficit (percent of GDP):
  - 2023: -0.8
  - 2024 onward: -0.2 (each year to 2033).
- Gross financing needs (GFN; percent of GDP): 2023: 15.7; 2024: 24.9; 2025: 20.5; 2026: 21.9; 2027: 23.0; 2028: 24.4; 2029: 24.8; 2030: 27.0; 2031: 29.1; 2032: 30.6; 2033: 30.8.
- Final DSA commentary: public debt projected to stabilize over the medium-term; overall risk signals low to moderate across tools.

### Key policy recommendations and assessments (condensed)
- Maintain monetary policy tightness until inflationary pressures firmly recede; avoid premature easing; tighten if upside risks materialize; adjust timely once disinflation is evident.
- Keep broadly neutral fiscal stance in 2024 while retaining fiscal space for temporary, well-targeted support to vulnerable households and viable firms if downside risks materialize.
- Slow pace of fiscal surplus accumulation is warranted to accommodate medium- and long-term spending needs (ageing, climate, infrastructure) within balanced-budget rule.
- Maintain tight macroprudential policy stance to contain housing-related systemic risks; continue vigilance against pockets of financial vulnerability, including banks’ cross-border and FX exposures and NBFI linkages.
- Strengthen AML/CFT controls for non-resident customers and supervisory effectiveness.
- Pursue structural policies: lifelong learning, SkillsFuture, Job-Skills Integrators, active labor market policies, and climate transition support.

*INTERNATIONAL MONETARY FUND, July 1, 2024.*

### 2.1 percent in 2024. After reaching 6.1 percent in 2022, inflation has steadily declined to

### SINGAPORE — July 1, 2024

### Recent economic developments
- Growth moderated to 1.1 percent in 2023 from 3.8 percent in 2022, mainly due to a contraction in manufacturing in 2023H1.
- A small negative output gap of -0.4 percent was estimated to have emerged in 2023.
- Growth accelerated to 2.2 percent (year-on-year) in 2023Q4 from 0.5 percent in 2023H1.
- Growth rose to 2.7 percent (year-on-year) in 2024Q1, at a seasonally adjusted annualized quarter-on-quarter rate of 0.2 percent, supported by strong inbound tourism.
- Goods exports decreased by 10.1 percent in 2023; total merchandise exports rose by 4.4 percent in 2024Q1.
- Goods and services imports declined by 13.4 percent and 2.4 percent, respectively, in 2023.

### Inflation, disinflation, and monetary policy
- Headline inflation peaked at 7.5 percent (year-on-year) in September 2022 and declined to 2.7 percent in April 2024.
- MAS core inflation (excludes costs of accommodation and private transport but includes food and energy) decreased from a peak of 5.5 percent in January 2023 to 3.1 percent in April 2024.
- Two-year ahead inflation expectations based on consensus forecasts have been well-anchored at around 1.8 percent.
- MAS operates a basket, band, and crawl (BBC) exchange rate framework and tightened policy from October 2021–October 2022; policy settings have been unchanged since then to restrain imported inflation and domestic cost pressures.
- Net foreign exchange (FX) purchases moderated to US$36 billion in 2023 from US$73 billion in 2022.
- Gross international reserves increased to US$351 billion at end-2023 (70 percent of GDP).
- The increase in Goods and Services Tax (GST) rate from 8 to 9 percent in January 2024 is expected to raise inflation temporarily in 2024.

### Labor market and prices pressures
- Unemployment rate was 1.9 percent in 2023 and 2.1 percent in 2024Q1.
- Nominal wage growth slowed from 7.8 percent in 2022Q1 to 2.6 percent in 2023Q4, then rose to 6.4 percent in 2024Q1.
- Job vacancy to unemployed persons ratio was 1.7 in 2023Q4, exceeding the pre-pandemic level.
- Signs of persistent services inflation remain, particularly for healthcare and food services, amid accumulated cost pressures.

### Fiscal policy stance and tax changes
- Fiscal balance recorded a surplus of 0.8 percent of GDP in FY2023, after a fiscal deficit averaging 0.7 percent of GDP in FY2021–22.
- GST rate increased from 7 to 8 percent in January 2023 and to 9 percent in January 2024.
- Carbon tax rate increased from S$5 per tonne to S$25 per tonne in January 2024.

### Financial sector, leverage, and vulnerabilities
- Financial system structure in 2021: Banks 597.8 (assets in percent of GDP), Central Bank 108.7, NBFIs 340.1, Total 1046.6 (from Text Table).
- Banking sector comprises nearly 60 percent of total financial sector assets and shows ample capital buffers, sound asset quality, high profitability, and comfortable liquidity.
- Non-bank financial institutions (NBFIs), mainly investment funds and insurers, have weathered high interest rate stresses well.
- Household debt around 55 percent of GDP in 2023; corporate debt around 130 percent of GDP in 2023.
- Private sector credit declined throughout 2023, then recovered to 0.8 percent (year-on-year) in April 2024.
- Corporate sector NPLs remained low at around 2 percent in 2023; SME NPL ratio remained around 3 percent.
- High borrowing costs encouraged deleveraging via active mortgage paydowns and slower corporate investment.
- The financial sector faces pockets of vulnerabilities that could emerge during stress episodes, including banks’ cross-border and FX exposures, a small segment of highly leveraged corporates and households, and linkages between fast-evolving non-bank financial institutions and banks.

### Key policy recommendations and assessments
- Ensuring gradual disinflation remains top priority in the near term; monetary policy should remain tight until inflationary pressures firmly recede.
- The broadly neutral fiscal stance relative to 2023 will complement the tight monetary policy stance in achieving price stability, while targeted support to vulnerable households and firms will provide temporary relief from high costs of living and business.
- With strong public finance and fiscal institutions, Singapore is well positioned for future downside risks as well as medium- and long-run spending needs from population ageing and climate change.
- The tight macroprudential policy stance remains appropriate given potential systemic risks arising from the housing market.
- Continued vigilance is warranted to contain pockets of financial vulnerability despite currently well-contained risks.
- Reforms in the Forward Singapore report (published in October 2023), such as strengthening social safety nets and lifelong learning programs, should promote inclusive growth amid rapid population ageing and technological advancements including Artificial Intelligence.
- Singapore continues to make robust progress with climate policies, including carbon pricing and green bonds as well as climate risk management and information architecture for the financial sector.

*INTERNATIONAL MONETARY FUND, July 1, 2024.*

### 13.      The housing market has cooled moderately since 2023. Private residential property prices

### 1sgpea2024001-print-pdf - 13.      The housing market has cooled moderately since 2023. Private residential property prices

### Housing market developments
- Private residential property prices increased by 4.9 percent (year-on-year) in 2024Q1, decelerating from the 11.4 percent increase observed in 2023Q1.
- Transaction volumes moderated during 2023.
- Contributing factors to the housing market easing: high mortgage rates, the hike in stamp duties in April 2023, and an increase in the supply of private residential units.
- There is a significant divergence in private residential property price growth across regions.
- Commercial real estate (office and retail) has shown a lackluster recovery relative to pre-pandemic levels despite rebounds in return-to-office and tourism.

### External position and exchange rate assessment
- The current account (CA) surplus rose to 19.8 percent of GDP in 2023 (from 18.0 percent in 2022), led by an improvement in the primary income balance.
- Staff assess the CA gap to be in the range of 5.2–8.8 percent of GDP (after adjusting for cyclical and country-specific factors).
- Main drivers of the strong external position: financial center status, high household savings related to rapid aging, and a relatively stronger fiscal position compared to the rest of the world.
- The real effective exchange rate (REER) appreciated by 7.2 percent in 2023 relative to 2022.

### Growth outlook and key projections
- Real GDP growth is projected to recover to 2.1 percent in 2024 from 1.1 percent in 2023.
- Growth is projected to reach 2.7 percent (year-on-year) in 2024H1, driven by a strong carryover from the global tech cycle, and moderate in 2024H2.
- The small negative output gap that emerged in 2023 is expected to close by around 2025.
- Over the medium term, growth is projected to converge gradually to 2.5 percent, driven by private consumption, with capital accumulation and total factor productivity growth offsetting ageing’s impact on employment growth.

### Inflation outlook
- Both headline and MAS core inflation are projected to moderate to 3 percent in 2024.
- MAS core inflation is expected to stabilize at around 2 percent by 2025.
- Disinflation is expected to be gradual amid persistent upward price pressures.

### Risks to outlook
- Growth risks mainly stem from external factors, with downside risks having diminished since the last Article IV consultation.
- Key downside risk: a steeper than projected growth slowdown in China.
- Other risks: prolonged tight U.S. monetary policy causing abrupt corrections in U.S. financial, housing, and commercial real estate markets; broader geopolitical conflicts and geoeconomic fragmentation (GEF); supply chain disruptions; vulnerability to short-term capital flow shifts.
- Technological change: developments in Artificial Intelligence (AI) could boost productivity but disrupt labor markets due to AI substitutability.
- Climate change: vulnerability to rising sea levels poses a longer-term growth threat.
- Inflation risks are tilted to the upside due to still-tight labor market conditions, accumulated cost pressures from high wage growth, and potential intensification of geopolitical conflicts increasing energy and food price volatility.

### Authorities’ views (summarized)
- Authorities expect a balanced recovery and gradual disinflation but see net upside inflation risks in the near term.
- Authorities emphasized that the EBA evaluation of the real exchange rate should not be conflated with current exchange rate policy settings and stressed the medium-term perspective.
- Authorities noted that the policy gap identified by staff is largely driven by Singapore’s stronger fiscal position and that household saving preferences and prudent fiscal behavior explain much of the CA balance.

### Monetary policy guidance
- MAS’ exchange-rate-based monetary policy framework has served Singapore well; commitment to price stability strengthened credibility.
- Recommendation: monetary policy should be kept tight until inflationary pressures firmly recede; premature easing should be avoided.
- If upside inflation risks materialize, the monetary policy stance should be tightened.
- Once disinflation is firmly in sight, monetary policy should be adjusted in a timely manner, guided by data and clearly communicated.
- Authorities broadly concur with staff: current stance appropriately tight; vigilance against upside inflation risks; note that monetary transmission may occur with substantial lag beyond a 12-month horizon.

### Fiscal policy stance and measures
- The FY2024 Budget implies a surplus of 0.2 percent of GDP and a broadly neutral fiscal stance.
- Cyclically adjusted fiscal balance excluding land sales estimated to be in a surplus of 0.8 and 0.2 percent of potential GDP in FY2023 and FY2024, respectively.
- Fiscal space: government owns financial assets (net of government debt) amounting to 95 percent of GDP as of end-March 2023.
- Recommended use of fiscal space: temporary and well-targeted support to vulnerable households and firms should downside risks materialize.
- FY2024 targeted measures:
  - GST Voucher Fund topped up by S$6 billion (0.8 percent of GDP).
  - Assurance Package enhanced by S$1.9 billion (0.3 percent of GDP).
  - Enterprise support package of S$1.3 billion (0.2 percent of GDP).
- Medium- and long-term fiscal challenges: rising spending needs from rapid ageing (notably healthcare), productivity and transition support for workers and firms, climate change risks, and lumpiness of public housing and infrastructure spending.
- Staff estimate: total healthcare spending could rise from 4.2 percent of GDP in 2015 to 8.6 percent of GDP in 2050.
- Net Investment Returns Contributions (NIRC) have contributed a sustainable revenue stream averaging 3.1 percent of GDP annually over the past decade.
- Outstanding SGS (Infrastructure) debt as of end-FY2023: S$11.2 billion (1.6 percent of GDP).
- Recommendation: continue fiscal spending to address medium- and long-term challenges within Singapore’s balanced-budget rule; a slower pace of fiscal surplus accumulation would be warranted to accommodate spending needs, taking into account the cyclical position and inflation trends.
- Higher public spending and stronger social safety nets are expected to reduce external surpluses over the medium and long term by lowering net public savings and catalyzing private investment, reducing precautionary household savings, and narrowing the savings-investment gap.

### Financial sector and macroprudential stance
- The financial sector remains resilient; continued vigilance is warranted for vulnerabilities that could materialize during stress episodes.
- Near-term policy stance: monetary tightness complemented by targeted fiscal support to cushion vulnerable households and businesses.

_Italic: Based on text from the provided IMF content unit._

### 31.      Singapore’s financial sector remains resilient, though vigilance against pockets of

### Singapore’s financial sector remains resilient, though vigilance against pockets of vulnerabilities is warranted

### Overall financial stability assessment
- Risks to financial stability remain contained with solid capital and liquidity buffers.
- Continued maintenance of adequate provisioning buffers and prudent risk management across banks, including non-D-SIBs, is recommended to navigate external shocks.
- A sudden downward adjustment in housing prices poses a potential systemic risk (¶35).
- MAS should continue to enhance oversight given interlinkages within the system and cross-border exposures.
- Staff welcomes further progress made in completing several 2019 FSAP recommendations (Annex V).

### Domestic systemically important banks (D-SIBs) — stress test findings and implications
- MAS’ industry-wide D-SIBs stress test (2023) adverse scenario: protracted recession from acute monetary policy tightening in advance economies, slowdown in China with real estate stress, dysfunctional U.S. dollar funding markets; 3-year stress test horizon.
- Results:
  - D-SIBs can maintain capital adequacy above regulatory requirements, although capital adequacy declines by nearly 5 percentage points during the stress test horizon.
  - Second-order solvency-liquidity feedback loop results indicate an additional capital depletion of around 1 percentage point per year.
- Recommendations and observations:
  - Continuous vigilance against cross-border exposures, particularly vis-à-vis China and Hong Kong SAR, is warranted.
  - MAS could consider increasing the stress test horizon (e.g., a 5-year horizon similar to the 2019 FSAP).
  - Given importance of U.S. dollar funding and liquidity, the option of introducing minimum requirements for foreign currency liquidity coverage ratios (LCR) should remain open, in addition to current supervisory approach.
  - MAS’ cashflow-based liquidity stress tests and FX liquidity stress tests are welcome.

### Nonfinancial corporates (NFCs) and households — stress test results and vulnerabilities
- NFCs:
  - On average maintain resilient viability and low NPLs.
  - MAS NFC stress tests (2023) found that 15 percent of all listed NFCs would face viability concerns under a stress scenario after utilizing liquidity buffers.
  - These corporates hold around 8 percent of total corporate sector debt — potential transmission to financial system via asset quality channel.
- Households:
  - MAS household stress tests: debt servicing ability manageable under a concurrent immediate increase in mortgage rates alongside a negative income shock.
  - Identified a small segment of highly leveraged borrowers with below-median income more vulnerable to payment risks; they account for less than 5 percent of system-wide mortgage loans.
- Policy implication:
  - Continued maintenance of adequate provisioning coverage across banks could help weather risk transmission to the banking system.
  - Total provisioning coverage of the banking sector is 110 percent as of 2023Q3.

### Persistently high interest rates, CRE risks, and stress testing scenarios
- Risks:
  - Persistently high interest rates and volatile global sentiment could heighten asset quality risks as mortgages on fixed rates reprice and refinancing costs rise.
  - Refinancing of commercial mortgages could become challenging if CRE prices continue to decline.
  - Banks’ CRE loan exposure exceeds 15 percent.
- Recommendation:
  - MAS could incorporate scenarios of large CRE price declines and volatility in real estate investment trusts in its stress tests.
  - Vigilance against interconnectedness risks amplified in a higher-for-longer rates environment is warranted.

### Macroprudential stance and housing market measures (¶35)
- Rationale:
  - Systemic risks could originate from the housing market; mortgage loans represent around a third of banks’ total loans to residents.
  - Recent cooling in the housing market, recovery in incomes, and past rental price increases brought current house prices broadly in line with fundamentals.
- Current macroprudential measures:
  - Loan-to-value ratio: currently at 15-75 percent differentiated by borrower characteristics.
  - Total debt servicing ratio (TDSR): 55 percent.
  - Banks’ total property-related exposures cap: 35 percent of eligible assets (in place since at least 1987).
  - Capital-based measures: countercyclical capital buffers (CCyB) currently set at 0 percent; additional capital surcharges/buffers on D-SIBs; D-SIBs required to maintain positive CCyB for exposures in jurisdictions outside Singapore with positive CCyB.
- Recommendations:
  - Maintain the tight macroprudential policy stance to prevent buildup of systemic risks from housing.
  - Phase out the additional residency-based differentiation resulting from the April 2023 increase in the ABSD rates in a way that does not disrupt the market, and then continue phasing out remaining residency-based differentiation once systemic risks from the housing market clearly dissipate.
- Contextual data:
  - Singapore’s credit-to-GDP gap is estimated at around negative 30 percent as of 2023.
  - The share of private housing purchases attributable to non-residents doubled from 3-4 percent during the pandemic to about 7 percent in 2023Q1; share by transaction volumes rose to 13 percent in 2023Q1.

### Nonbank financial intermediation (NBFI), asset management, and insurance
- Sector expansion and transmission channels:
  - Asset management sector expanded significantly in size and scope.
  - Potential transmission to banking sector via counterparty risks (about 20 percent of banking sector assets and liabilities are vis-à-vis NBFIs) and liquidity risks from asset fire sales.
- MAS initiatives and findings:
  - Asset managers regulated by MAS required to have effective liquidity risk management; MAS conducts thematic inspections.
  - 2023 liquidity stress simulation covering Singapore-domiciled and foreign-domiciled funds concluded most investment funds would have sufficient liquidity for severe stress redemptions.
  - Retail investment funds subject to leverage limits under the Code on Collective Investment Schemes; MAS analyzes leverage for other funds (e.g., hedge funds) and engages supervisors.
  - Framework for designating domestic systemically important insurers (D-SIIs) came into effect in January 2024.
  - Annual industry-wide stress test incorporated a more rigorous liquidity stress scenario.

### Digital innovation, payments connectivity, and crypto-related regulation
- Payments and CBDC:
  - Bilateral cross-border instant interoperable QR payment linkages expanded with several Asian peers; usage growing.
  - MAS sees no immediate need for retail CBDC but plans to pilot a “live” issuance of wholesale CBDC for atomic settlement across domestic banks.
- Digital payment tokens and stablecoins:
  - Nineteen Digital Payment Token (DPT) service providers have received licenses to operate in Singapore as of May 2024.
  - MAS expanded regulatory measures for DPT services to protect customer digital assets and continues to discourage cryptocurrency speculation by retail customers.
  - MAS is working on legislative amendments for the regulatory framework for stablecoins; framework applies to single currency stablecoins issued in Singapore and pegged to the Singapore dollar or any G10 currency, with issuer requirements on value stability, capital, redemption at par, and disclosure.
- Other innovation and risks:
  - MAS exploring asset tokenization initiatives.
  - To promote responsible AI use in finance, a consortium led by MAS released an open-source toolkit in 2023.
  - Recommendation: continue emphasis on safety and soundness, reassess cybersecurity landscape regularly, and adjust related strategies and guidelines timely.

### Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT)
- Assessment and recent events:
  - Singapore’s robust AML/CFT framework and ongoing enhancements are welcome.
  - Recent money laundering case involving illegally acquired assets worth US$2 billion indicates scope for further improvement on analysis of cross-border money laundering risks.
- Recommendations:
  - Strengthen preventive measures for non-resident customers: customer due diligence, beneficial ownership checks, transaction monitoring, and swift reporting of suspicious transactions.
  - Increase effectiveness of supervisory oversight of banks; consider targeted thematic inspections on treatment of wealthy nonresident customers.
  - Deepen analysis of impact of financial integrity events on financial stability, higher-risk jurisdictions, and associated financial flows.
- MAS actions:
  - Launched the first centralized digital platform (COSMIC) to facilitate customer information sharing among financial institutions related to AML/CFT, focusing on misuse of legal persons, trade finance misuse, and proliferation financing.
  - Increased scrutiny of wealth management and investment industries, including single family offices.

### Authorities’ views and policy stance
- Financial sector soundness:
  - For all banks, capital adequacy remained above regulatory requirements under adverse scenarios of MAS solvency stress tests.
  - MAS notes domestic NPLs and NPLs to real estate sectors in Hong Kong SAR and China remain low.
  - MAS engages regularly with banks to strengthen U.S. dollar liquidity risk management and contingency funding planning.
  - MAS exploring data collection on cross-sectoral and cross-asset exposures to assess interconnectedness risks.
  - Household debt not assessed to be elevated compared to disposable income.
- NBFI and digital innovation stance:
  - Insurers, investment funds, and trust companies represent bulk of NBFI sector and are well regulated with limited financial stability risks.
  - MAS adopting risk-centric regulatory measures for digital payment token services focusing on consumer harm, money laundering, technology, and cyber risks.
  - Banking system’s exposure to digital assets is small with limited impact on monetary policy transmission and financial stability.
- Policy on macroprudential housing measures:
  - Authorities agreed with IMF staff that tight macroprudential stance should be maintained.
  - Authorities regard residency-based differentiation in ABSD rates as necessary to limit speculative housing demand from non-residents and contain systemic risks.
  - Authorities emphasize distinction between capital flows into financial assets and real estate properties when applying IV framework, citing Singapore’s attractiveness and a near-“vertical” housing supply curve.
  - Authorities note April 2023 ABSD rate increase was calibrated after holistic deliberation; nonresident purchase shares warranted action given sharp increases in 2023Q1.
  - Future ABSD adjustments should be based on holistic assessments, progress with housing supply, and implemented without unduly disrupting the market.

### Key regulatory minimums and ratios (Text Table 2)
- Minimum CET1 capital adequacy ratio: 6.5 percent
- Tier 1 CAR capital adequacy ratio: 8.0 percent
- Total capital adequacy ratio: 10.0 percent
- Capital conservation buffer: 2.5 percent
- Countercyclical capital buffer (CCyB): 0 percent
- Leverage ratio: 3 percent
- Liquidity coverage ratio for D-SIBs:
  - Singapore dollar LCR: 100 percent
  - All currency LCR for local D-SIBs: 100 percent
  - All currency LCR for other D-SIBs: 50 percent
- Net stable funding ratio for D-SIBs:
  - All currency basis for local D-SIBs: 100 percent
  - All currency basis for other D-SIBs: 50 percent
- Minimum liquid assets:
  - All currency liquid assets over qualifying liabilities: 16 percent
- Note: Non-D-SIBs can choose to comply either with LCR or MLA. Banks that are internationally active are subject to 100 percent all currency LCR and 100 percent net stable funding ratio requirements.

*IMF staff summary of Singapore financial sector (excerpts).*

### 42.      In 2023, the government unveiled the Forward Singapore (see Box 2) initiative aimed

### Forward Singapore and Policy Assessment

### Forward Singapore initiative: scope and fiscal implications
- Forward Singapore aims at renewing Singapore’s social compact across public education, healthcare, housing, social insurance and assistance, labor market policies, and fiscal policy management.
- The FY2024 budget includes about S$5 billion (0.7 percent of GDP) in spending measures related to Forward Singapore.
- About S$40 billion (5.6 percent of FY2024 GDP) is expected to be spent on related measures by FY2030.

### Demographics, family policy, and aging population
- Singapore’s population is rapidly aging, with about 1 in 4 Singaporeans projected to be over 65 by 2030.
- Total fertility rate is dropping, to 0.97 in 2023, dipping below 1 for the first time in the country’s history.
- Forward Singapore policies highlighted:
  - enhancing preventive healthcare and elderly welfare,
  - providing seniors more opportunities to be engaged in the community,
  - enhancing existing pension schemes to strengthen retirement adequacy,
  - supporting families through every stage of life, including affordable public housing and greater flexibility in work arrangement.

### Income inequality, labor market, and social safety nets
- Income inequality has declined: Gini indices reached a two-decade low in 2023, both before and after tax and transfers.
- Lower-income households experienced faster real income growth compared to higher-income households from 2012–2023.
- Wealth inequality persists but is mitigated by high home ownership.
- Gender pay gap: female workers estimated to earn 6 percent less than their male counterparts in 2023 after accounting for differences in age, occupation, industry, education, and usual hours worked.
- Policy measures and recommendations:
  - Introduction of a financial support scheme for the involuntarily unemployed (parameters to be announced later this year) to reduce temporary income losses and reduce incentives for precautionary saving.
  - Careful calibration of duration, level of benefits, and eligibility criteria to minimize disincentives to re-enter the workforce.
  - Integrate active labor market programs to facilitate return to quality employment.
  - Enhancements to existing schemes to uplift lower-wage workers and narrow wage gaps.
  - Further improvements in access to social assistance programs and preschool education for low-income families.

### Digitalization and Artificial Intelligence (AI)
- Singapore ranks highest on the IMF’s AI Preparedness Index among all countries and is well prepared for AI adoption.
- The National AI Strategy 2.0 (launched in 2023) and government commitment:
  - committed to investing over S$1 billion (0.1 percent of GDP) in the next five years to foster AI talent, infrastructure, and industry development.
  - topped up the National Productivity Fund to attract high quality and high value investments.
- Labor market exposure to AI:
  - about 77 percent of Singapore’s labor force is employed in occupations that have a high potential for AI integration.
  - about half of this highly exposed workforce (39 percent of total workforce) is employed in occupations in which AI can play a complementary role.
  - remaining share of the highly exposed workforce is in occupations where AI has a higher potential for substituting tasks.
  - staff analysis indicates a higher proportion of women are employed in jobs more susceptible to being replaced by AI technologies.
- Policy recommendations to mitigate disruption:
  - lifelong learning and SkillsFuture to support re-skilling and up-skilling.
  - use of the expected financial support scheme for the involuntarily unemployed to assist transitions.
  - integrate re-skilling/up-skilling to ease labor market tightness and help contain inflationary pressures.

### Climate change, emissions policy, and resilience
- Singapore’s carbon intensity has declined over several decades and is currently one of the lowest in the world.
- Net-zero target: goal to achieve net-zero emissions by 2050 pursued through business transformation and low-carbon technologies.
- Policy instruments and commitments:
  - Carbon tax current rate S$25 (US$19) per tonne of CO2 emission.
  - Government committed to raise the rate to S$45 (US$33) per tonne in 2026 and to S$50-80 (US$37-59) by 2030.
  - Singapore’s International Carbon Credit Framework allows carbon tax liable companies to use eligible international carbon credits to offset up to 5 percent of their taxable emissions (implemented January 1, 2024).
  - Electricity generation relies heavily on natural gas; FY2024 Budget allocates S$5 billion (0.7 percent of GDP) to the Future Energy Fund.
  - Government aims to issue a total of S$35 billion (4.9 percent of FY2024 GDP) in green bonds by 2030; first sovereign green bond valued at S$2.4 billion issued in August 2022.
  - Coastal and Flood Protection Fund established in 2020 with initial funding of S$5 billion (1 percent of FY2020 GDP).
  - Launched S$125 million Coastal Protection and Flood Management Research Program in 2023.
- Financial-sector climate risk and disclosure measures:
  - MAS consultation on guidelines on transition planning for banks, insurers, and asset managers.
  - MAS climate risk analysis in 2023 assessed impacts of net-zero transition pathways on large banks’ and insurers’ credit and market risk exposures to 27 climate policy relevant sectors.
  - Mandatory climate disclosure requirements for listed firms by 2025, and for large non-listed firms by 2027, aligned with International Sustainability Standards Board.
  - MAS published the Singapore-Asia Taxonomy for Sustainable Finance to define green, amber/transition, and ineligible activities; authorities may consider linking taxonomy to disclosures in the future.

### Authorities’ views
- Authorities emphasize fostering an equitable and inclusive economy through measures such as:
  - Progressive Wage Model, Workfare Income Supplement (WIS) scheme, GST Voucher Scheme, Assurance Package, Majulah Package.
  - Launching a financial support scheme for the involuntarily unemployed.
- Authorities commit to embracing technological advancements via National AI Strategy 2.0, SkillsFuture, tripartite system, and Jobs Transformation Maps.
- Authorities reiterate commitment to robust climate policies, energy demand management, energy efficiency, renewable energy promotion, and smart grid technologies.
- MAS developed the Singapore-Asia Taxonomy (SAT) primarily for standardization; SAT disclosures are voluntary and not currently linked to climate-related disclosures.

### Staff appraisal: macro outlook, policy stance, and risks
- Growth and inflation projections:
  - Growth projected to recover to 2.1 percent in 2024, supported by improved global demand for semiconductors and inbound tourism, and converge gradually to 2.5 percent over the medium term.
  - Headline and MAS core inflation are projected to moderate to 3 percent in 2024; disinflation expected to be gradual.
- External position: Singapore’s external position in 2023 is assessed as substantially stronger than the level implied by medium-term fundamentals and desirable policies.
- Risks:
  - Downside and upside risks to growth and inflation stem from global developments in China and the U.S., geoeconomic fragmentation, climate change, tight labor market, and volatility in energy and food prices.
- Policy recommendations:
  - Maintain the current tight monetary policy stance until inflationary pressures firmly recede; adjust policy timely once disinflation is in sight and tighten if upside inflation risks materialize.
  - Fiscal stance in 2024 is appropriate and broadly neutral with targeted support; Singapore has substantial fiscal space to deploy temporary and targeted support if downside risks materialize.
  - Slower pace of fiscal surplus accumulation within the balanced budget rule is warranted to accommodate rising spending needs.
  - Continue tight macroprudential policy stance to contain housing-related system risk and maintain vigilance against pockets of financial-sector vulnerabilities, including banks’ cross-border and FX exposures, a small segment of highly leveraged corporates and households, and linkages with non-bank financial institutions.

*IMF staff report content as provided.*

### 60.      The authorities’ efforts to promote a more inclusive, resilient, and greener economy

### The authorities’ efforts to promote a more inclusive, resilient, and greener economy

### Overview
- Authorities’ efforts to promote a more inclusive, resilient, and greener economy are commendable.
- Government’s Forward Singapore report outlines reforms including enhanced social safety nets and lifelong learning programs to foster inclusive growth amid rapid population aging and AI advancements.
- Singapore is advancing climate policies, such as carbon pricing, green bonds, and improved climate risk management and information architecture for the financial sector.
- It is recommended that the next Article IV consultation with Singapore be held on the standard 12-month cycle.

### Asset Management Industry: growth, structure, and exposures
- Assets under management quadrupled since 2010 and stood at about US$3.7 trillion in 2022.
- Alternative investment segment grew five times over the same period.
- At end-2022, there were about 1,200 regulated fund management companies supported by more than 250 fund services providers.
- By October 2023, 969 Variable Capital Companies (VCCs) have been incorporated and re-domiciled in Singapore, representing 1,995 sub-funds.
- In December 2023, there were 1,400 single family offices that were awarded tax incentives.
- Asset management cross-border orientation:
  - About 76 percent of funds were sourced from abroad in 2022.
  - 88 percent of total assets under management were invested outside Singapore in 2022.
- Domestic financial system links and exposures:
  - Investment funds and trust companies together account for about 13 percent of domestic financial system assets.
  - Banking system exposure to all NBFIs is less than 15 percent of total bank credit assets.
  - Investment funds hold about 12 percent of outstanding sovereign and corporate bonds.
  - Investment funds hold less than 6 percent of the domestic equity market.
- Policy and institutional initiatives:
  - Introduction of the Variable Capital Companies (VCC) framework.
  - Tax incentives for family offices.
  - Comprehensive regulatory framework and incentive schemes to defray set-up costs.

### Forward Singapore: key policy themes and measures
- Participation and publication:
  - Forward Singapore workgroup led by the government and including National Trades Union Congress published the report in October 2023.
  - Over 200,000 Singaporeans participated in engagement sessions and surveys.
- Embracing learning beyond grades:
  - Prioritize holistic learning and adaptability.
  - Improve preschool accessibility and strengthen SkillsFuture for continuous learning.
  - FY2024 budget introduced the SkillsFuture Level-Up Program for mid-career workers aged 40 and above.
  - Support measures include funds to offset out-of-pocket course fees and allowance to workers opting for selected full-time programs.
- Respecting and rewarding every job:
  - Policies to narrow the wage gap and improve pay/recognition for manual skills and care sector jobs.
  - Measures introduced in FY2024 budget include:
    - Raising the qualifying income cap from S$2,500 to S$3,000 and raising the payouts under the Workfare Income Supplement scheme.
    - Raising the Local Qualifying Salary from S$1,400 to S$1,600.
    - Raising wage ceiling for co-funding under the Progressive Wage Credit Scheme from S$2,500 to S$3,000 for 2025 and 2026 and increasing the co-funding level for 2024 from a maximum of 30 percent to 50 percent.
- Supporting families through every stage:
  - Reduction in monthly childcare fee caps in government-supported pre-schools.
  - Increase in preschool subsidies for lower income families.
  - Top up to the Edusave Endowment Fund with S$2 billion (0.3 percent of GDP).
  - Offering timely access to affordable housing for young couples.
- Enabling seniors to age well:
  - Improve primary and preventive healthcare and launch more Active Aging Centers.
  - Majulah Package with a total expected lifetime cost of S$8.2 billion (1.2 percent of FY2024 GDP) to boost retirement savings of Singaporeans born in 1973 or earlier.
  - Improvements to the Central Provident Fund (CPF) system, including increasing CPF contribution rates for those aged 55 to 65, raising the maximum amount that can be put into individuals’ CPF retirement accounts, and increasing payouts through the Silver Support Scheme.
- Empowering those in need:
  - Comprehensive support to lower income families and enhanced inclusivity for individuals with disabilities.
  - Make preschool education more accessible and affordable to reduce early gaps for children from underprivileged families.
- Investing in Singapore’s shared future:
  - Focus on sustainable management of resources and strengthen climate adaptation and mitigation measures.
  - Investments to strengthen food and water security and initiatives to diversify food sources.

*IMF staff summary based on the provided content unit.*

### Box 2. Singapore: Forward Singapore (concluded)

### Box 2. Singapore: Forward Singapore (concluded)

### Policy orientations and civic initiatives
- Fiscal prudence will ensure responsible public finance management.
- Contributing collectively as one united country:
  - Build a culture of giving, strengthen multiracialism, and encourage civic participation.
  - Initiatives include connecting donors and volunteers with community needs, fostering interactions among Singaporeans, and establishing the Singapore Government Partnerships Office to enhance the government’s engagement and collaboration with Singaporeans.

### Real sector developments
- Growth and sectoral performance:
  - Real GDP growth slowed from 3.8 percent in 2022 to 1.1 percent in 2023.
  - Manufacturing sector contracted amid a sharp downturn in the global electronics cycle.
  - Post-pandemic recovery stronger than peers overall, but recovery remains uneven:
    - Construction, hotel and food sectors are below their pre-pandemic levels.
- Domestic demand and contributions:
  - Total domestic demand and final domestic demand showed mixed dynamics in recent years (see Table 5 projections for detailed contributions).
  - Net exports continued to contribute positively to GDP growth.

### External sector and external asset/liability position
- Current account and reserves:
  - Current account (CA) surplus increased to 19.8 percent of GDP in 2023, reflecting an improvement in the primary income balance.
  - Gross official reserves increased in 2023.
- International investment position and external balances:
  - Net international investment position decreased to 171 percent of GDP in 2023 due to valuation effects as the S$NEER appreciated following monetary policy tightening.
  - Singapore has a net asset position in portfolio investment and a net liability position in FDI holdings.
  - Financial account recorded net capital outflows in 2023, reflecting net outflows of portfolio investment and in “other investment.” Net FDI inflows increased in 2023.
- Balance of payments (Table 2 highlights):
  - Current account balance (US$ billions): 60.2 (2018), 60.5 (2019), 58.0 (2020), 86.1 (2021), 89.7 (2022), 99.1 (2023), projections 94.8 (2024), 97.7 (2025).
  - Goods balance (US$ billions): 104.0 (2018), 96.3 (2019), 103.7 (2020), 121.7 (2021), 150.5 (2022), 154.8 (2023).
  - Primary income balance (US$ billions): -46.1 (2018), -43.7 (2019), -47.7 (2020), -64.9 (2021), -95.5 (2022), -80.8 (2023).

### Labor market developments
- Participation, employment, and wages:
  - Residents’ labor force participation decreased in 2023, although remained above the pre-pandemic level.
  - Employment increased in 2023, led by non-residents segment, but at a slower pace amid the slowdown in growth.
  - Wage growth eased as labor market tightness eased in 2023 but picked up again in 2024Q1.
  - Job vacancies relative to job seekers remain higher compared to the pre-pandemic level.
- Labor market strains and composition:
  - Number of retrenched workers increased in 2023, led mainly by services and manufacturing sectors.
  - Expansion in the foreign workforce was largest for semi-skilled work permit holders.

### Inflation developments
- Inflation trajectory:
  - Both headline and MAS core inflation declined in 2023, albeit with some stickiness in MAS core inflation.
  - CPI inflation (period average): 6.1 (2022); 4.8 (2023); projections 3.0 (2024), 2.5 (2025) (Table 5).
  - MAS core inflation (period average): 4.1 (2022); 4.2 (2023); projections 3.0 (2024), 2.0 (2025) (Table 5).
- Price components:
  - Price increases in private transportation cost and food prices eased in 2023.
  - Prices of cars and car ownership certificates declined, easing private transportation cost increases.
  - Residential rents declined recently, but services inflation shows signs of persistence.
  - Inflation expectations based on consensus forecast remain well anchored.

### Monetary and financial sector developments
- Interest rates, yields and money:
  - Singapore dollar interest rates plateaued after a steep rise in 2022, in tandem with U.S. interest rates.
  - The yield curve has shifted slightly down compared to a year ago but remains inverted.
  - Due to disinflation, real government bond yields have risen, getting into positive territory.
  - Broad money continued to grow but at a slower rate.
- Market performance and credit:
  - Singapore stock market recovered to its pre-pandemic level and continued to perform well.
  - Credit growth weakened amid the growth slowdown and a high interest rate environment.

### Banking sector and financial soundness
- Sector structure and funding:
  - Banks continue to dominate the financial sector, holding nearly 60 percent of the financial sector assets.
  - Non-bank deposits—mostly fixed, demand, and saving deposits—hold the lion share of the funding base.
  - Share of fixed deposits have risen as deposit holders took up higher yielding fixed deposits.
  - Loan-to-deposit ratios including for foreign currency continued to decline in 2023.
- Asset quality and loan composition:
  - Loans to the corporate sector—mostly trade-related—account for nearly half of non-bank loans.
  - Despite monetary policy tightening, asset quality remained solid; NPLs declined in sectors such as transportation and communication.
  - Banks’ exposure to housing has risen by about 200 bps in the last two years.
- Financial soundness indicators (Table 7):
  - Regulatory capital to risk-weighted assets: 16.8 (2018), 17.1 (2022), 16.4 (2023).
  - Return on assets: 0.9 (2018), 1.2 (2022), 1.3 (2023).
  - Overall non-bank loans to deposits ratio (LTD): 88.5 (2018), 83.1 (2022), 81.3 (2023).

### Housing market and household balance sheets
- Prices, transactions, and vacancies:
  - House prices moderated in late 2023, except in the outside central region, where pent-up demand continued.
  - Residential property transaction activity showed signs of cooling; vacancy rates in the private market picked up in 2023.
  - Housing stock per capita remains broadly stable.
  - Price-to-rent ratio in Singapore has started to pick up as rental market pressures subsided owing to improvements in housing supply; price-to-income ratio momentum shows signs of cooling post 2023Q1.
- Household balance sheet and indebtedness:
  - Households continued to deleverage and their indebtedness remained low compared to peers.
  - Household balance sheet remained strong with net wealth about 4-times the GDP.
  - Liquid assets remained well above household debt position.
  - Households remained resilient with low NPLs and existing LTV measures helped build up significant buffer.

### Spillovers and external linkages
- Trade and financial linkages:
  - Singapore depends mainly on foreign final demand from China, the EU, and the US; Malaysia and Indonesia are important regional partners.
  - FDI stocks are dominated by the US and the EU and are mainly concentrated in the finance and insurance sector.
  - Singapore has large portfolio assets, making its 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 banks (including ASEAN banks) and European banks.
- Regional systemic risk:
  - East Asia is a major user of funds and likely to experience outward spillovers from Singapore in the event of banking sector stress in Singapore.
  - Cross-border exposures of domestic banks to greater China and other Asian economies remain high, exposing Singapore to the risk of regional spillovers.

### Demographic transition and labor force
- Aging and dependency:
  - Old-age dependency is projected to increase significantly in the medium to long term.
  - Singapore’s aging speed is among the highest in the region and advanced economies across the world.
- Labor participation and fertility:
  - Labor force participation has risen in recent years particularly for the elderly and women in prime-working age, but there is scope for further improvement.
  - The average number of children per woman is among the lowest in the world.

### Social and equality indicators
- Earnings and incomes:
  - Average monthly earnings have risen steadily.
  - Median wages for medium-skilled workers rose in 2023, while median wages for high-skilled and low-skilled workers have moderated.
  - Median household income continues to increase in real terms in recent years.
  - Real incomes of lower income groups have increased at a faster pace in the last decade.
- Inequality and distributional changes:
  - High inflation affected all income groups in recent years.
  - Inequality as measured by the Gini index has declined since the early 2010s.
  - Average Monthly Real Household Income by Decile (cumulative change, percent) examples:
    - Total: 1,735 (2000) to 3,079 (2023); 77.5 (2000−2023).
    - 1st-10th decile: 315 (2000) to 452 (2023); 43.5 (2000−2023).
    - 91st-100th decile: 5,801 (2000) to 10,129 (2023); 74.6 (2000−2023).
    - Top decile / bottom decile ratio: 18.4 (2000) to 22.4 (2023).

### Key fiscal, macroeconomic and projection highlights
- Macroeconomic aggregates and projections (selected figures from Table 1 and Table 5):
  - Nominal GDP (2023): US$501.4 billion.
  - GDP per capita (2023): US$84,734.
  - Population (2023): 5.9 million.
  - Real GDP growth: 3.5 (2018), 1.3 (2019), -3.9 (2020), 9.7 (2021), 3.8 (2022), 1.1 (2023), projections 2.1 (2024), 2.3 (2025).
  - Current account as percent of GDP: 16.0 (2018), 16.0 (2019), 16.6 (2020), 19.8 (2021), 18.0 (2022), 19.8 (2023), projections 18.0 (2024), 17.8 (2025).
- Inflation and unemployment projections (Table 5):
  - CPI inflation (period average): 6.1 (2022); 4.8 (2023); projections 3.0 (2024), 2.5 (2025).
  - Unemployment rate: 2.1 (2022); 1.9 (2023); projected 1.9 (2024, 2025).
- Fiscal accounts and government balance (Table 6 highlights):
  - Central government revenue (percent of GDP): 16.6 (2022), 18.1 (2023), projections 18.5 (2024), 18.6 (2025).
  - Central government expenditure (percent of GDP): 15.4 (2022), 15.2 (2023), projections 14.3 (2024), 15.6 (2025).
  - Net lending/borrowing (percent of GDP): 1.2 (2022), 2.9 (2023), projections 4.2 (2024), 3.0 (2025).
  - Gross debt (in percent of GDP): 157.1 (2022), 170.8 (2023), projections 175.0 (2024), 175.6 (2025).
- Money and credit (Table 3 and Table 5):
  - Broad money (M2) growth (period average): 7.8 (2022), 3.2 (2023).
  - Private credit growth (Table 5 projections): 5.1 (2024), 4.9 (2025).
- External and reserve metrics:
  - Gross official reserves (US$ billions): 287.7 (2018), 279.5 (2019), 362.3 (2020), 417.9 (2021), 289.5 (2022), 351.0 (2023).
  - Gross official reserves projections: 396.1 (2024), 449.0 (2025).
- Trade composition and partners (memorandum items):
  - Top three destinations for goods exports (2022, percent of gross goods exports): China (12.4 percent); Hong Kong SAR (11.2 percent); Malaysia (10.0 percent).
  - Main goods exports (2022, percent of total non-oil goods exports): machinery & transport equip. (63.1 percent); chemical products (14.4 percent); misc. manufactured articles (9.8 percent).

*International Monetary Fund staff summary based on the source PDF content.*

### Annex I. External Sector Assessment

### Annex I. External Sector Assessment

### Overall assessment and outlook
- Overall Assessment: The external position in 2023 was substantially stronger than the level implied by medium-term fundamentals and desirable policies.
- Uncertainty: Assessment subject to a wide range of uncertainty, reflecting Singapore’s very open economy and status as a global trading and financial center.
- Medium-term projection: The CA surplus is projected to narrow gradually driven by higher public spending, private investment and an increase in household consumption (as the share of prime working age population actively saving for retirement declines).
- Potential policy responses:
  - Planned execution of major green infrastructure projects and strengthening of social safety nets should help reduce external imbalances in the near term.
  - Over the medium term, higher public investment in health care, green and other physical infrastructure, and human capital, plus ongoing reforms to strengthen social safety nets, would help reduce net saving of the economy and external imbalances.

### Foreign asset and liability position and trajectory
- Background points:
  - 2023 NIIP stood at 171.4 percent of GDP, down from 178.4 percent of GDP in 2022 and below the average level of 227.1 percent of GDP in 2019-2023.
  - Gross assets and liabilities are high, reflecting Singapore’s status as a financial center.
  - About half of foreign liabilities are in FDI, and about a fifth are in the form of currency and deposits.
  - The CA surplus has been a main driver of the NIIP since the global financial crisis; valuation effects were material in some years, driven mainly by NEER appreciation as MAS tightened its exchange rate-based monetary policy.
  - CA and growth projections imply that the NIIP will rise over the medium term.
  - The large positive NIIP in part reflects accumulation of assets for old-age consumption, expected to be gradually unwound over the long term.
- Assessment and risks:
  - Large gross non-FDI liabilities at 425.9 percent of GDP in 2023—predominantly cross-border deposit taking by local branches of foreign banks—present some risks.
  - Risks are mitigated by large gross asset positions, banks’ large short-term external assets, and authorities’ close monitoring of banks’ liquidity risk profiles.
  - Singapore has large official reserves and other official liquid assets.

- Key 2023 (% GDP) figures:
  - NIIP: 171.4
  - Gross Assets: 1,122.3
  - Res. Assets: 70
  - Gross Liab.: 950.9
  - Debt Liab.: 326.9

### Current account (CA)
- Background:
  - CA surplus was 19.8 percent of GDP in 2023, up from 18 percent in 2022.
  - Improvement mainly reflects an improvement in primary income balance as receipts rose and payments declined.
  - CA balance higher than the average of 17.7 percent since 2018 and slightly lower than the post-global-financial-crisis peak of 22.9 percent in 2010.
  - Singapore’s large CA reflects a strong goods balance and a small surplus in the services balance partly offset by a (primary) income deficit.
  - Structural drivers of high savings: Singapore’s status as a financial center, consecutive fiscal surpluses in most years, rapid aging, and a mandatory defined-contribution pension program (whose assets were about 84.8 percent of GDP in 2023).
  - In 2023, public saving increased as the fiscal balance improved further following COVID-related stimulus, while private saving decreased slightly.
- Assessment (EBA-guided):
  - Staff assesses the 2023 CA gap to be in the range of 5.2–8.8 percent of GDP, with a midpoint of 7.0 percent.
  - Identified policy gaps in 2023 reflect a more contractionary fiscal policy adopted in 2023 in Singapore compared to the rest of the world.
- Key 2023 (% GDP) CA figures:
  - CA: 19.8
  - Cycl. Adj. CA: 20.1
  - EBA Gap / Staff Gap: Staff Gap: 7.0
- Staff adjustments to EBA approach (to account for Singapore specificities) that lead to staff-estimated CA gap of about 7.0 percent of GDP:
  - Downward adjustment of 1 percentage points to EBA’s implied contribution of public health expenditures to the norm.
  - Downward adjustment of 3.7 percentage points to the norm for NFA composition and component-specific return differentials on the CA.
  - Downward adjustment of 2.2 percentage point of GDP to account for measurement biases due to inflation and portfolio equity retained earnings (-5.4 and +3.2 percent of GDP, respectively).
  - Contribution to the CA gap: fiscal gap about 1.6 percent of GDP, credit gap about -0.1 percent of GDP, public health spending about 0.2 percent of GDP, and reserves about 0.3 percent of GDP.

### Real exchange rate (REER)
- Background:
  - The REER appreciated by 7.2 percent in 2023 reflecting the appreciation of the NEER by 5.3 percent.
  - This followed an appreciation of the REER by 5.8 percent and an appreciation of the NEER by 3.9 percent, both cumulative, between 2020 and 2022.
  - As of April 2024, the REER appreciated by 2.0 percent relative to its 2023 average.
- Assessment:
  - Consistent with the staff CA gap, staff assesses the REER to be undervalued in the range of 10.4 to 17.6 percent, with a midpoint of 14.0 percent in 2023 (applying an estimated elasticity of 0.5).

### Capital and financial accounts: flows and policy measures
- Background:
  - Singapore has an open financial account and, as a trade and financial center in Asia, changes in market sentiment can affect Singapore significantly.
  - 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 2023, the capital and financial account featured lower net outflows of 7.1 percent of GDP compared to 40.6 percent in 2022 (outflows ranged from 4.6 to 40.6 percent in 2018–22).
- Assessment:
  - The financial account is likely to remain in deficit as long as the trade surplus remains large.

### FX intervention and reserves level
- Background:
  - NEER is 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 MAS reached US$351billion (70 percent of GDP) in 2023.
  - Aggregate data on foreign exchange intervention operations has been published since April 2020 (with a 6-month lag).
- Assessment:
  - In addition to FX reserves held by MAS, Singapore also has access to other official foreign assets managed by Temasek and GIC.
  - Current level of official external assets appears adequate, even after considering prudential motives; there is no clear case for further accumulation for precautionary purposes.
  - External assets managed by GIC and Temasek amount to at least 100 percent of GDP.

### Risk Assessment Matrix — selected external and domestic risks, impacts, and policy responses
- External conjunctural risks:
  - Abrupt global slowdown (China, U.S.): Likelihood Medium; Impact Medium. Policy responses: Maintain countercyclical policies, targeted fiscal support, provide targeted support to viable firms and institutions while ensuring governance and strong insolvency and bankruptcy procedures.
  - Commodity price volatility: Likelihood High; Impact Medium. Policy responses: Monetary policy remain data dependent; provide temporary and targeted support to vulnerable groups.
  - Monetary policy miscalibration: Likelihood Medium; Impact Medium. Policy responses: Monetary policy data dependent; adjust macro-prudential policies; provide targeted support where needed.
  - Intensification of regional conflicts: Likelihood High; Impact Medium. Policy responses: Extend targeted fiscal support; provide liquidity support to financial markets and use prudential regulatory actions if necessary.
  - Systemic financial instability: Likelihood High; Impact Medium. Policy responses: Adjust macro-prudential policies while safeguarding financial stability.
- External structural risks:
  - Deepening geo-economic fragmentation: Likelihood High; Impact High. Policy responses: Accelerate structural reforms to transform Singapore into a knowledge-based innovation-driven economy; use temporary and targeted fiscal stimulus if domestic demand weakens substantially.
  - Cyberthreats: Likelihood Medium; Impact Low. Policy responses: Assess adequacy of IT risk management, contingency planning, coordinate with global regulators, provide temporary liquidity/fiscal support if disruptions occur.
  - Extreme climate events: Likelihood Medium; Impact Medium. Policy responses: Enhance climate change adaptation strategies; improve preparedness and collaboration; provide targeted fiscal support to vulnerable groups.
  - Disorderly energy transition: Likelihood Medium; Impact Medium. Policy responses: Continue steady efforts to decarbonize energy sources, in particular for electricity generation.
- Domestic risks:
  - Disorderly correction in property prices: Likelihood Low; Impact Medium. Policy responses: Adjust macro-prudential policies; use targeted assistance measures to affected households.
  - De-anchoring of inflation expectation: Likelihood Low; Impact Medium. Policy responses: Tighten monetary policy stance and ensure clear communication.
  - Artificial Intelligence (AI) disruptions: Likelihood Medium; Impact Medium. Policy responses: Provide training programs to re-skill and upskill workers; enhance active labor market policies; improve social safety nets.

### Selected staff policy advice from the 2023 Article IV Consultation
- Fiscal policy:
  - Advice: Fiscal policy should continue to tighten and help moderate inflationary pressures without suppressing market price signals, while supporting the most vulnerable.
  - FY2024 stance: Fiscal stance in the FY2024 Budget is broadly neutral relative to FY2023, supporting monetary policy tightening to ensure disinflation.
  - Contingency: Should downside risks materialize, Singapore has fiscal space to deploy further policy support; fiscal policy should remain the first line of defense given its targeting ability.
- Monetary, exchange rate, and financial policies:
  - Advice: Monetary policy should maintain its tightening bias, and may need to tighten further, given persistently elevated core inflation and tight labor markets.
  - MAS actions: After five consecutive tightenings, MAS has remained on pause since April 2023.
  - FX liquidity monitoring: Potential stresses in core U.S. dollar funding markets call for continued close monitoring of Singapore banks’ U.S. dollar liquidity profiles; MAS continues to engage with banks and introduced granular cashflow-based FX liquidity stress tests for U.S. dollar cashflows.
  - Macroprudential stance: Tight stance remains appropriate and should be tightened further should housing price pressures continue. MPM toolkit includes CCyB, LTV, TDSR, and loan tenure limits.
  - ABSD recommendation: Staff recommend phasing out residency-based differentiation in ABSD once systemic risks from the housing market clearly dissipate. The ABSD continues to retain its residency-based distinction.
  - AML/CFT: MAS should continue refinements to AML/CFT regulations and supervision to increase financial institutions’ controls and risk detection capabilities. MAS launched COSMIC and Parliament passed a new bill expanding MAS investigation and supervisory capacity across six areas.
- Structural policies:
  - Labor market: Pursue active labor market policies, including Job-Skills Integrators, Forward Singapore objectives, and enhanced SkillsFuture to reskill and upskill workers; enhance flexibility of work arrangements where gaps exist.
  - Climate and energy transition:
    - Government accelerated low-carbon transition to net zero emission by 2050.
    - Carbon tax increased in the beginning of 2024 to S$25 per tonne of emissions from S$5 per tonne, with the aim of increasing it to S$50-S$80 per tonne by 2030.
    - FY2024 budget allocates S$5 billion to establish the Future Energy Fund to support infrastructure investments for Singapore’s energy transition.

*Source: Annex I. External Sector Assessment (selected content) from the provided IMF chapter.*

### Annex IV. Sovereign Risk and Debt Sustainability Analysis

### Annex IV. Sovereign Risk and Debt Sustainability Analysis

### DS A Summary Assessment and Commentary
- Final assessment: The overall risk of sovereign stress is low.
- Commentary:
  - Singapore's public debt is sustainable and large public financial assets are important risk mitigating factors.
  - While public debt rose during the pandemic, the strong post-pandemic rebound, combined with a tightening of fiscal policy and large net assets imply that the risk of sovereign stress is low.
  - Singapore is a low scrutiny country in the debt sustainability analysis framework for market access countries.
  - Not required for surveillance countries: A debt sustainability assessment is optional for surveillance-only cases and mandatory in cases where there is a Fund arrangement.
- Notes:
  - The risk of sovereign stress is broader than debt sustainability; unsustainable debt can require exceptional measures, while sovereign stress can be remedied by measures that do not involve debt restructuring (e.g., fiscal adjustment, new financing).
  - The near-term assessment is not applicable in cases where there is a disbursing IMF arrangement. In surveillance-only cases or in cases with precautionary IMF arrangements, the near-term assessment is performed but not published.

### Key Contextual Features of Singapore’s Public Debt
- Public debt-to-GDP: about 174 percent of GDP at end-FY2023.
- Net asset position: Positive, due to large public financial assets.
- Purpose of public debt issuance:
  - Development of Singapore’s debt market.
  - Meeting investment needs of the CPF.
  - Facilitating transfer of excess official foreign reserves from MAS to the government using Reserves Management Government Securities (RMGS).
- Share of public debt issued for spending purposes under SINGA: about 1 percent of public debt as of end-FY2023.
- MAS’s outstanding holdings of RMGS: S$260.2 billion at end-FY2023.
- All debt is held domestically and issued in local currency.
- Fiscal rule: Authorities' strong compliance with their balanced budget rule has led to sustained fiscal surpluses and the buildup of large net assets.

### Debt Coverage and Disclosures (DSA perimeter and accounting)
- Coverage used in DSA: Central government (budgetary central government).
- Are non-central government entities insignificant? No.
- Subsectors included in chosen coverage:
  - Budgetary central government: Yes
  - Extra budgetary funds (EBFs): No
  - Social security funds (SSFs): Yes
  - State governments: No
  - Local governments: No
  - Public nonfinancial corporations: No
  - Central bank: No
  - Other public financial corporations: No
- Commentary: Fiscal assumptions in this DSA are based on the central government debt.

### Public Debt Structure and Projections
- Debt-to-GDP:
  - 174.3 percent at end-FY2023 (labeled "Public debt 2023: 174.3")
  - Projected stabilization: Debt level is projected to stabilize at 178 percent of GDP in the medium-run.
- External public debt: Singapore does not have any external public debt.
- Purpose of issuing domestic local currency debt securities: deepen domestic debt market, meet CPF investment needs, provide long-term saving options to individual investors, facilitate transfer of official foreign reserves via RMGS.
- Residual maturity (reported): 6. years (as shown in figure caption).
- Debt by currency: No foreign currency public debt; domestic local currency issuance dominates.

### Baseline Scenario (selected year-by-year projections and contributions; percent of GDP unless otherwise indicated)
- Public debt (selected series):
  - Actual 2023: 174.3
  - 2024: 175.1
  - 2025: 175.8
  - 2026: 176.4
  - 2027: 177.1
  - 2028: 177.8
  - 2029: 178.3
  - 2030: 178.7
  - 2031: 179.2
  - 2032: 179.6
  - 2033: 180.1
- Change in public debt (yearly):
  - 2023: 16.0
  - 2024: 0.8
  - 2025: 0.6
  - 2026: 0.7
  - 2027: 0.7
  - 2028: 0.7
  - 2029: 0.4
  - 2030: 0.4
  - 2031: 0.4
  - 2032: 0.4
  - 2033: 0.4
- Contribution of identified flows (yearly): mirrors the change series (2023: 13.3; 2024: 0.8; 2025: 0.6; 2026: 0.7; 2027: 0.7; 2028: 0.7; 2029: 0.4; 2030: 0.4; 2031: 0.4; 2032: 0.4; 2033: 0.4).
- Primary deficit (percent of GDP): 
  - 2023: -0.8
  - 2024 onward (each year shown through 2033): -0.2
- Noninterest revenues (percent of GDP):
  - 2023: 18.6
  - 2024: 18.5
  - 2025: 18.7
  - 2026: 18.7
  - 2027: 18.8
  - 2028: 18.8
  - 2029: 18.9
  - 2030: 19.0
  - 2031: 19.0
  - 2032: 19.0
  - 2033: 19.0
- Noninterest expenditures (percent of GDP):
  - 2023: 17.9
  - 2024: 18.2
  - 2025: 18.5
  - 2026: 18.5
  - 2027: 18.6
  - 2028: 18.6
  - 2029: 18.7
  - 2030: 18.8
  - 2031: 18.8
  - 2032: 18.8
  - 2033: 18.8
- Automatic debt dynamics (percent of GDP):
  - 2023: 0.2
  - 2024: -2.1
  - 2025: -2.4
  - 2026: -1.9
  - 2027: -2.1
  - 2028: -1.9
  - 2029: -2.4
  - 2030: -2.4
  - 2031: -2.5
  - 2032: -2.5
  - 2033: -2.6
- Real interest rate and relative inflation (percent):
  - 2023: 2.7
  - 2024: 1.2
  - 2025: 1.8
  - 2026: 2.4
  - 2027: 2.3
  - 2028: 2.2
  - 2029: 2.2
  - 2030: 2.1
  - 2031: 2.1
  - 2032: 2.0
  - 2033: 2.0
- Real growth rate (percent):
  - 2023: -2.5
  - 2024: -3.2
  - 2025: -4.2
  - 2026: -4.3
  - 2027: -4.4
  - 2028: -4.1
  - 2029: -4.5
  - 2030: n.a.
  - 2031: -4.5
  - 2032: -4.6
  - 2033: -4.6
- Other identified flows (percent of GDP):
  - 2023: 13.9
  - 2024: 3.0
  - 2025: 3.2
  - 2026: 2.7
  - 2027: 2.9
  - 2028: 2.8
  - 2029: 3.0
  - 2030: 3.0
  - 2031: 3.1
  - 2032: 3.2
  - 2033: 3.2
- Contribution of residual: 2023: 2.7; 2024–2033: 0.0 each year.
- Gross financing needs (GFN; percent of GDP):
  - 2023: 15.7
  - 2024: 24.9
  - 2025: 20.5
  - 2026: 21.9
  - 2027: 23.0
  - 2028: 24.4
  - 2029: 24.8
  - 2030: 27.0
  - 2031: 29.1
  - 2032: 30.6
  - 2033: 30.8
- Of which: debt service (percent of GDP):
  - 2023: 16.4
  - 2024: 25.1
  - 2025: 20.6
  - 2026: 22.1
  - 2027: 23.1
  - 2028: 24.5
  - 2029: 25.1
  - 2030: 27.1
  - 2031: 29.3
  - 2032: 30.8
  - 2033: 31.0
- Currency composition of gross financing needs:
  - Local currency: mirrors debt service series (2023: 16.4; 2024: 25.1; ...; 2033: 31.0)
  - Foreign currency: 0.00 for all years shown.
- Memo items:
  - Real GDP growth (percent): 2023: 1.6; 2024: 1.9; 2025: 2.5; 2026: 2.5; 2027: 2.5; 2028: 2.4; 2029: 2.6; 2030: 2.6; 2031: 2.6; 2032: 2.6; 2033: 2.6
  - Inflation (GDP deflator; percent): 2023: -1.7; 2024: 2.9; 2025: 2.4; 2026: 2.0; 2027: 2.0; 2028: 2.0; 2029: 2.0; 2030: 2.0; 2031: 2.0; 2032: 2.0; 2033: 2.0
  - Nominal GDP growth (percent): 2023: -0.1; 2024: 4.8; 2025: 4.9; 2026: 4.5; 2027: 4.6; 2028: 4.4; 2029: 4.6; 2030: 4.6; 2031: 4.6; 2032: 4.6; 2033: 4.6
  - Effective interest rate (percent): 2023: 0.0; 2024: 3.6; 2025: 3.5; 2026: 3.4; 2027: 3.3; 2028: 3.3; 2029: 3.3; 2030: 3.2; 2031: 3.2; 2032: 3.2; 2033: 3.1

- Staff commentary on baseline:
  - Public debt is projected to stabilize over the medium-term, moderated by positive growth and a tight fiscal stance.
  - A moderation in investment needs by the CPF, as employment growth slows in line with population aging, will also help limit upward pressures on debt.

### Realism of Baseline Assumptions (summary)
- The realism tools do not indicate any major concerns: the projected debt reduction and fiscal adjustment is within norms.
- Forecast Track Record comparisons and distributional diagnostics (figures summarized) place Singapore within acceptable percentiles relative to comparator group: Advanced Economies, Non-Commodity Exporter, Surveillance.
- Laubach (2009) rule referenced for implied spread behavior: linear rule assuming bond spreads increase by about 4 bps in response to a 1 ppt increase in the projected debt-to-GDP ratio.

### Medium-term Risk Analysis (indexes, modules, and signals)
- Debt fanchart module:
  - Value: 76.2
  - Contribution: 1.1
  - Fanchart width (percent of GDP): reported as 76.2 and contribution 1.1
  - Debt fanchart index (DFI): 1.3
  - Risk signal (DFI): Moderate (signal classification: low if DFI < 1.13; high if DFI > 2.08; otherwise moderate)
- Probability of debt non-stabilization (percent): 18.8 (contribution 0.2)
- Gross Financing Needs (GFN) module:
  - Average baseline GFN (percent of GDP): 23.2 (contrib 7.9)
  - Initial banks' claims on the general government (pct bank assets): 10.1 (contrib 3.3)
  - Change in banks' claims in stress (pct bank assets): 1.0 (contrib 0.3)
  - GFN financeability index (GFI): 11.5
  - Risk signal (GFI): Moderate (signal classification: low if GFI < 7.6; high if GFI > 17.9; otherwise moderate)
- Medium-term index (index number):
  - Value and weight contributions: Debt fanchart index 1.3; GFN financeability index 11.5
  - Medium-term index risk signal: 5/ (normalized medium-term index suggests low level of risk)
  - Final assessment: Prob. of missed crisis, 2024-2029, if stress not predicted: 9.1 pct.
  - Prob. of false alarms, 2024-2029, if stress predicted: 42.0 pct.
- Commentary: The two medium-term tools suggest low (Debt Fanchart Module) and moderate (GFN Financeability Module) levels of risk; the normalized medium-term index suggests low level of risk.

*Source: Fund staff.*

### Annex V. Status of Main Recommendations of the 2019 FSSA

### Annex V. Status of Main Recommendations of the 2019 FSSA

### Liquidity and funding (Recommendation 1)
- Recommendation: The MAS should strengthen U.S. dollar liquidity among D-SIBs.
- Time*: MT
- Authorities’ Status Update (as of May 2024):
  - Ongoing. MAS has continued to engage banks to strengthen their foreign currency liquidity management. Building on the 2019/20 review on banks’ foreign currency liquidity management, MAS undertook two reviews in 2023, namely liquidity stress test practices and contingency funding plans (with observations impacting foreign currency liquidity management).
  - MAS shared industry sound practices and issued bank-specific recommendations to the DSIBs in these key areas: (i) setting of appropriate stress test limits and triggers for significant foreign currencies such as U.S. dollars (USD), (ii) reviewing of methodologies to realistically assess their FX swap capacities under stress conditions, which inform setting of mismatch allowed for each significant currency; and (iii) setting out clearly their USD funding options under stress, including details on the available channels to raise USD funding, limits to each facility or counterparty, settlement timing and prioritization of funding actions.
  - Between 2018 and March 2024, the proportion of more stable USD funding sources, comprising non-bank deposits and debt issuance, has increased and constitutes the bulk of their USD funding sources. MAS will continue to monitor the banks’ USD funding profile through regular engagements and various USD liquidity indicators.
  - D-SIBs consider issues such as central bank interest rate normalization, inflation, geopolitical situation when assessing their funding positions, all of which are actively discussed at banks’ internal management forums such as Asset-Liability Committees (ALCO).

### Resolution regime and operational readiness (Recommendations 2–4)
- Recommendation 2: Establish a core staff within the MAS Resolution Unit (RSU) dedicated to resolution work and over time, transfer resolution planning to the RSU.
  - Time*: I
  - Status Update (as of May 2024): Completed. MAS established a new Resolution Office (RSO) in October 2023, comprising staff fully dedicated to resolution work. Over time, RSO will steer efforts across MAS to put in place an effective resolution regime for financial institutions in Singapore, working closely with various departments to develop and enhance MAS’ resolution toolkit, as well as build strong capabilities within the organization to support MAS’ role as a resolution authority.

- Recommendation 3: Expand the scope of bail-in to include senior unsecured debt securities.
  - Time*: MT
  - Status Update (as of May 2024): Not implemented. After careful consideration, the authorities will not implement this recommendation. As conveyed by the authorities in the discussions with the FSAP assessors, the regime needs to be seen in the context of existing high regulatory standards as the first line of defense, such as Singapore's capital requirements that are two percentage points higher than the Basel capital standards, as well as close and intensive supervisory oversight. In designing the scope of the bail-in regime, the authorities had carefully balanced the trade-off between having broader bail-in scope which would increase the loss-absorbing capacity of a bank, versus the higher impact of possible contagion to the financial system and balance sheet of households. Given that the bail-in tool is relatively untested, MAS’ preference is to have a narrower scope (i.e., confined to subordinated unsecured debt securities and equities).

- Recommendation 4: Continue to develop guidelines and playbooks for the new resolution tools. Staff should be trained, and processes tested.
  - Time*: I
  - Status Update (as of May 2024): Completed. MAS has continued ongoing efforts to enhance its operational readiness and update its guidelines and playbooks for resolution tools developed and reflect the latest policy developments over time. Key examples include:
    - A table top walkthrough of the resolution of a foreign bank branch with significant operations in Singapore, where the home resolution authority takes a Single Point of Entry (SPE) approach and MAS recognizes the actions of, and cooperates with, the home resolution authority. The walkthrough sought to validate previous policy considerations and steps for cooperating with a home resolution authority while highlighting new insights in light of international developments in resolution approaches and considerations. It also served to train and familiarize staff with the requisite operational steps in such a scenario.
    - Updates to the Handbook on Management of Distressed Banks to incorporate updated operational procedures, aligning with recent legislative amendments (e.g., to include references to the Financial Services and Markets Act or the Banking Act), changes in organization structure and key contact details.
    - Ongoing work to further update the Handbook and the Guidance on Resolution Tools in other areas such as (i) valuation – study issues around the use of independent valuers to perform valuation in resolution; (ii) resolution fund trustee and bridge entity – consider the possible set up of a bridge entity to hold the distressed bank’s assets, as well as a trustee to administer the resolution fund in the event of a resolution; (iii) bail-in execution – develop exchange mechanics based on FSB’s practices paper on bail-in execution; and (iv) operational procedures for the Intervention Team’s (I-Team) functional area plans.

### Outsourcing and payments oversight (Recommendations 5–6)
- Recommendation 5: The MAS should formalize and clarify that it may require pre-notification of material outsourcing arrangements where the MAS is not satisfied that a bank has managed its outsourcing risk adequately.
  - Time*: MT
  - Status Update (as of May 2024): Completed. MAS issued the revised Outsourcing Guidelines (for banks and merchant banks) on December 11, 2023. As per the Guidelines, where a bank is not meeting MAS’ supervisory expectations, MAS requires the bank to take additional measures to address the deficiencies noted, which may include the pre-notification of new material outsourcing arrangements.

- Recommendation 6: Devote more resources to the oversight and supervision of the payments systems.
  - Time*: NT
  - Status Update (as of May 2024): Completed. From 2019, MAS allocated an additional 40 percent of dedicated resources to the oversight and supervision of payment systems. In addition, the Payments and Infrastructure Division has expanded to become the Payments Department in 2020, in charge of supervising both payment services and payment systems.

### Cybersecurity and cyber risk surveillance (Recommendations 7–8)
- Recommendation 7: Enhance the cyber resiliency of the central bank and MEPS+ by: (i) clarifying the role of Chief Cyber Security Officer; and (ii) continuing to strengthen its cybersecurity resiliency.
  - Time*: I
  - Status Update (as of May 2024):
    - (i) Completed. The role of the Chief Cyber Security Officer (CCSO) has been clarified. With the clarification, the CCSO will now assume the role of an independent second line of defense to challenge MAS Information Technology Department / Data and Technology Architecture Department on matters relating to MAS’ technology risk and cyber resilience. A new CCSO office that is independent from the FI technology risk supervisory divisions has been set up to assist the CCSO to perform the independent assurance role.
    - (ii) Completed. MAS has completed various cybersecurity initiatives such as Netflow, Database Activity Monitoring and User Behavioral Analytics to enhance the protection of MAS’ critical systems. In addition, MAS has embarked on a cybersecurity transformation roadmap to strengthen cybersecurity resiliency on an ongoing basis. This would include implementing new measures (e.g., Data Loss Prevention) and enhancing existing security tools.

- Recommendation 8: Develop a cyber network map that takes into account both financial linkages and Information and Communications Technology connections and use it for cyber risk surveillance.
  - Time*: MT
  - Status Update (as of May 2024): Completed. MAS has mapped a snapshot of the cyber interconnections of financial institutions (FIs) in Singapore, taking into account the financial importance and linkages between each entity. The cyber map integrates the following information:
    - Cyber interconnections of key financial institutions spanning banks, insurers, payment service providers, capital market services licensees and financial market infrastructure providers, including connections to other key financial institutions and to third-party service providers; and
    - Each entity’s relative financial importance, through a financial measure of the potential financial impact to the banking system if an entity fails due to a cyber incident, which is used to prioritize between nodes.
  - Use of the map:
    - (i) identify key nodes based on the network map to inform and prioritize cyber risk surveillance efforts;
    - (ii) engage FIs on outsourcing, third-party and supply chain risk management practices for key service providers identified through the cyber map; and
    - (iii) reach out to fellow regulators on means to engage key service providers that are common to many FIs globally. For example, MAS has been engaging FSB to address concentration risks posed by major cloud service providers such as Amazon, Google, and Microsoft by proposing the setting up of a Cloud Oversight Forum formed by global financial regulators.

* “I-Immediate” is within one year; “NT-near-term” is 1–3 years; “MT-medium-term” is 3–5 years.

*Source: Fund staff and the authorities’ self-assessment (Authorities’ Status Update as of May 2024).*

### 1.1 The Singapore authorities would like to thank the Article IV team for a constructive

### 1.1 The Singapore authorities would like to thank the Article IV team for a constructive

### Recent Economic Developments and Outlook
- Singapore’s economic growth expanded by 1.1% in 2023, gathering pace in the latter half of the year.
- Growth eased sequentially in the first half of 2024, but improved on a year-ago basis.
- Tourism-related activities normalised in Q2 after mega concert-driven boosts in Q1.
- Manufacturing output stabilised following the contraction in Q1, as the global IT recovery broadened.
- The modern services cluster continued to be supportive of growth.
- 2024 growth projection: expected to grow by 1–3%, in line with its potential.
- MAS Core Inflation slowed to 3.1% y-o-y in Apr-May 2024 from 4.2% in 2023.
- CPI-All Items inflation declined to 2.9% y-o-y, from 4.8% last year, aided by falling private transport and accommodation inflation.
- Declines in inflation occurred despite:
  - rising carbon taxes,
  - a second increase in the Goods and Services Tax (GST) rate in January 2024,
  - higher water prices in Q2.
- Significant strengthening of the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) continues to dampen import prices.
- Labour market cooled with the resident unemployment rate rising to its pre-COVID average.

### Short-term Inflation and Price Outlook
- Disinflation trend expected to continue, albeit gradually, amid further expected catch-up in services prices to earlier cost increases.
- Global inflation projected to remain stable.
- Domestic cost pressures expected to moderate as wage growth eases and productivity improves.
- As firms progress in cost passthrough, the pace of price increases needed to restore profitability should slow.
- MAS Core Inflation expected to step down more discernibly in Q4 2024 and into 2025.
- 2024 annual inflation projections:
  - MAS Core Inflation and CPI-All Items inflation projected to average 2.5–3.5% (1.5–2.5% when the impact of the GST rate hike is excluded).

### Macroeconomic Policies
- In January and April 2024, MAS maintained the prevailing rate of appreciation of the S$NEER policy band, with no change to the width of the band or the level at which it was centred.
- MAS assessed the prevailing rate of appreciation of the policy band as sufficient and necessary to anchor the disinflation path by restraining imported inflation and domestic cost pressures.
- Current policy settings judged consistent with inflation stepping down more discernibly towards the end of this year and into 2025.
- Fiscal policy in 2024:
  - Tailored to provide further targeted assistance to households and firms facing cost-of-living and cashflow concerns.
  - Budget set out priorities to build a more productivity-driven economy and equitable society, aligned with Forward Singapore.
  - The fiscal impulse for FY2024 is expected to be broadly neutral.
- Tight macroprudential policy stance maintained to dampen speculative housing demand from investors amid tight supply conditions.
- Authorities remain vigilant against build-up of excessive housing leverage in the banking system.

### Financial Sector Policies
- Domestic financial system described as resilient with strong buffers to cushion against adverse shocks.
- Banks in Singapore are well-capitalised with healthy liquidity positions and a stable and diversified funding base.
- Capital adequacy ratios for all domestic systemically important banks (D-SIBs) are above the minimum regulatory requirements under the adverse scenario set out by MAS’ solvency stress test, which incorporated:
  - a major downturn in Singapore’s trading partners,
  - sharply tighter global financial conditions amid a correction in key global property markets.
- Results affirm Singapore banks have adequate buffers to withstand further interest rate and income shocks.
- Non-bank financial institutions (NBFIs) have weathered stresses from higher interest rates and remain well-positioned to meet liquidity needs.
- MAS continues to foster an innovative and responsible digital asset ecosystem while maintaining high vigilance against money laundering and terrorism financing risks.
- MAS has strengthened regulatory measures for digital payment token services by adopting a risk-centric approach focused on:
  - consumer harm,
  - money laundering and terrorism financing,
  - technology and cyber risks.

### Medium-Term Issues and Structural Policies
- Government expects spending to rise significantly in the future for healthcare, climate change and clean energy transition.
- Social spending expected to rise to support lower-income Singaporeans at various stages of life including retirement, and to help workers with job transitions to higher skilled occupations.
- Budget 2024 laid out initial instalment of Forward Singapore initiatives to help Singaporeans navigate uncertainties from structural shifts, technological disruptions, and the green transition.
- Policies to foster inclusivity and reduce wage disparity include the Progressive Wage Model (PWM).
- Social support measures include the permanent GST Voucher Scheme and the Workfare Income Supplement (WIS).
- Additional measures announced:
  - A financial support scheme for the involuntarily unemployed.
  - SkillsFuture Level-Up Programme supporting mid-career workers to upskill or reskill, including:
    - SkillsFuture (Mid-Career) Credit top-up for all Singaporeans aged 40 and above,
    - SkillsFuture Mid-Career Training Allowance for those enrolled in selected full-time training courses.
- Measures aim to provide greater assurance to job seekers after involuntary unemployment and those seeking training/upgrading.
- Policies to enhance productive capacity:
  - Incentives for firms to invest in tangible and intangible capital.
  - Measures to facilitate technology transfer from more productive sectors and firms.
  - New Refundable Investment Credit (RIC), a corporate tax credit with a refundable cash feature to support high-value and substantive economic activities in key sectors and new growth areas.
  - Budget allocations to upgrade nationwide broadband network; invest in energy transition infrastructure and clean energy security; strengthen R&D ecosystem; build know-how for technologies such as Artificial Intelligence.
- Exchange rate and current account observations:
  - S$REER appreciated substantially from late 2021 to 2022, gaining about 9% with strong nominal currency appreciation.
  - S$REER appreciated by a further 4% since the start of 2023.
  - Despite appreciation, since late 2021 Singapore’s current account balances continued to rise, reflecting temporary investment weakness.
  - Authorities expect Singapore’s structural current account surplus to moderate over the medium-term as:
    - household saving rate begins to fall with population ageing,
    - income growth slows,
    - government net savings decline with anticipated increases in spending on healthcare and measures to combat climate change.

### Final Remarks and Authorities’ Position
- Authorities will remain vigilant over global and domestic developments and assess implications for macroeconomic and financial stability.
- Authorities stand ready to undertake appropriate policy responses where needed.
- Authorities remain committed to longer-term domestic restructuring to embrace new economic opportunities and promote greater inclusive and sustainable growth.
- Authorities agree to the publication of the 2024 Singapore Article IV Consultation Report.

*Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1sgpea2024001-print-pdf.pdf*

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_Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1sgpea2024001-print-pdf.pdf_