## 1sgpea2026001

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### Context
- Singapore faced unusually high global uncertainty including:
  - Transmission from the war in the Middle East through oil price shocks due to reliance on imported energy.
  - Continued uncertainty around future trade actions despite the effective U.S. tariff rate on Singapore remaining at about 3.5 percent, with 67 percent of exports to the U.S. exempted.
  - A global AI boom supporting growth, with risk of an AI bust adversely affecting the electronic sector.
  - Tighter global financial conditions that could test financial stability, including through the non-bank financial sector.
- Pre-shock strengths:
  - Growth averaged 3.9 percent over 2023–25.
  - Inflation low and stable under exchange-rate-based monetary policy.
  - Well‑capitalized and liquid banking sector; strong supervisory and regulatory frameworks.
  - Substantial fiscal reserves available and previously deployed in large shocks.
- Policy guidance: calibrate economic policies to preserve macroeconomic and financial stability amid evolving external conditions and to help reduce external imbalances over the medium and long term.

### Recent developments
- Growth and output:
  - Growth: 5.0 percent in 2025.
  - Output gap: positive at 0.8 percent in 2025.
  - Activity driven by externally oriented tradable sectors; manufacturing buoyed by electronics.
- Trade and external sector:
  - Goods exports: 104.9 percent of GDP in 2024 → 107.9 percent of GDP in 2025 (driven by re-exports of electronics).
  - Goods imports: 74.9 percent of GDP in 2024 → 78.7 percent of GDP in 2025.
  - 2026Q1: oil and other crude imports fell by 7 and 5 percent y/y, respectively; chemicals exports declined by 6 percent; machinery exports rose 47 percent y/y.
  - Net imports of oil and gas: roughly 7 percent of GDP.
  - 2025: 39 percent of petroleum oil imports and 26 percent of gas imports sourced from countries bordering the Strait of Hormuz.
  - Over 90 percent of electricity generated by imported natural gas.
- Labor market:
  - Unemployment rate: 2.0 percent in 2025.
  - Vacancy-to-unemployment ratio: 1.6 (2025).
  - Wage growth: 5.4 percent (y/y) in 2025Q4.
  - Services unit labor costs: rose by 0.6 percent in 2025.
  - Productivity gains (2025): 6 percent tradable sectors, 3 percent nontradable sectors.
  - Advance data: unemployment 2.1 percent in March 2026; hiring and wage expectations weakened in March 2026.
- Inflation:
  - Annual headline inflation: 0.9 percent in 2025 (down from 2.4 percent in 2024).
  - MAS core inflation: 0.7 percent in 2025 (down from 2.8 percent in 2024).
  - Headline inflation: 1.8 percent in April 2026.
  - MAS views MAS core inflation of just under 2 percent as consistent with overall price stability.
- Fiscal policy:
  - Fiscal stance: neutral in FY2025 (April 2025–March 2026).
  - Fiscal balance (IMF presentation net lending/borrowing): surplus of 1.6 percent of GDP in FY2025 (budgeted surplus 0.4 percent of GDP); FY2024 surplus 1.2 percent of GDP.
  - Over-performance driven by higher-than-expected revenues (corporate income tax, vehicle quota premia, stamp duties); total expenditure broadly in line with budget.
- Monetary policy and reserves:
  - MAS framework: basket, band, and crawl (BBC) exchange-rate-based.
  - MAS eased policy January and April 2025 by slightly reducing the S$NEER’s rate of appreciation; maintained stance July 2025–January 2026; tightened by increasing the S$NEER’s rate of appreciation in April 2026.
  - Weekly average S$NEER appreciated by 1.2 percent in 2025 and by 0.4 percent from end-December 2025 to end-April 2026.
  - Net FX purchases: US$4 billion in 2024H2 → US$14 billion in 2025H1.
  - Gross international reserves: US$409 billion at end-2025; US$427 billion at end-April 2026; US$371 billion at end-2024 (US$427 billion equals 68 percent of GDP at end-April 2026 as presented).
- Financial conditions:
  - 3-month compounded SORA: 2.5 percent in April 2025 → 1.1 percent in March 2026.
  - Domestic credit growth: 1.9 percent in 2024 → 5.8 percent in 2025.
  - Financial conditions tightened at onset of the Middle East war, eased in 2025H2, tightened in March 2026, eased thereafter.

### Outlook and projections (baseline and assumptions)
- Baseline assumptions:
  - Energy supply disruptions related to the war resolved by end-2026.
  - Oil prices: averaging $94 per barrel in 2026, $82 in 2027, moving toward $73 per barrel in 2031 (roughly 40 percent increase relative to pre-war levels in 2026).
  - Natural gas price: assumed increase by 26 percent in 2026.
  - U.S. effective tariff rate on Singapore: constant at 3.5 percent.
  - MAS maintains monetary policy stance following April 2026 tightening.
  - FY2026 budget implemented as planned (moderately tight monetary policy stance and moderately expansionary fiscal policy stance).
- Growth projections:
  - 2025 = 5.0 percent; 2026 = 3.5 percent; 2027 = 2.7 percent.
  - Medium term: converge to potential growth estimated at 2.5 percent.
  - Output gap: 0.6 percent in 2026; projected to close by 2028.
- Inflation projections:
  - Headline inflation: 2.6 percent in 2026; 2.1 percent in 2027.
- Revisions relative to previous forecasts:
  - Inflation: October 2025 WEO forecast 2026 = 1.3 percent, 2027 = 1.9 percent; pre-war forecast revisions (ppt): +0.3 (2026) and 0.0 (2027); increase due to war (ppt): +1.0 (2026) and +0.2 (2027); 2026 AIV baseline forecast: 2.6 percent (2026) and 2.1 percent (2027).
  - Growth: October 2025 WEO forecast 2026 = 1.8 percent, 2027 = 2.5 percent; pre-war forecast revisions (ppt): +2.2 (2026) and +0.2 (2027); impact of war (ppt): -0.7 (2026) and 0.0 (2027); strong 2026Q1 (ppt): +0.2 (2026); 2026 AIV baseline forecast: 3.5 percent (2026) and 2.7 percent (2027).

### Risks and scenarios
- Downside risks (skewed):
  - Reescalation of geopolitical tensions in the Middle East → higher energy prices, shortages in fertilizer and petrochemicals, higher food and input costs, weaker domestic demand, reduced growth.
  - Protectionist shocks and policy uncertainty (e.g., U.S. Section 301 and Section 232 investigations) → undercut export-oriented economy.
  - AI and tech cycle bust → reduced demand and investment in technology industries.
  - Sharper-than-expected tightening of global and domestic financial conditions → weigh on credit growth.
- Upside/offsetting possibilities:
  - Earlier normalization of commodity supply or easing of trade tensions, stronger external demand, positive investor sentiment.
  - AI adoption may lift potential growth via productivity gains; geoeconomic fragmentation and aging/climate change pose long-term downside risks.
- Staff scenarios (drawing on April 2026 WEO):
  - Severe downside Middle East conflict scenario:
    - Oil and gas prices rise by up to 100 and 200 percent, respectively, relative to pre-war levels.
    - Average petroleum spot price index approx $110 per barrel in 2026 and about $125 in 2027.
    - Global corporate risk premia increase by 100 bps in 2026.
    - Global growth near recession.
    - Singapore: growth slows to 2.6 percent in 2026, output gap -0.1 percent in 2026, growth 1.5 percent in 2027; inflation expectations rise well above 2 percent; inflation rises to 3.8 percent in 2026 and 4.3 percent in 2027.
  - Upside coordinated global policy-reset scenario:
    - U.S. tariff removal and fiscal reform, Chinese demand rebalancing, higher euro area public investment → Singapore growth 4.4 percent in 2026.

### Policy implications highlighted
- Macroeconomic and financial stability:
  - Calibrate policies to preserve macroeconomic and financial stability amid rapidly evolving external conditions.
  - Maintain readiness to deploy substantial fiscal reserves if large downside shocks materialize.
- Monetary policy:
  - MAS’s BBC framework supported low and stable inflation; MAS tightened in April 2026 anticipating MAS core inflation pickup.
  - Staff: current stance moderately tight and appropriate under baseline; remain data-dependent with a tightening bias if second-round inflation emerges.
  - If severe adverse scenario materializes, tightening options include steepening the slope of the policy band or upward re-centering.
- Fiscal policy:
  - FY2025 fiscal stance assessed as neutral; FY2026 implementation and calibrated fiscal policy should balance supporting growth and containing inflationary pressures.
  - Avoid broad-based fiscal support that could amplify inflationary pressures; target support within budget envelope.
  - In major downside shock, prompt and time-bound targeted support appropriate given fiscal space (government owns large financial assets net of government debt amounting to 85 percent of GDP as of end-March 2024).
- Financial sector resilience:
  - Banking sector ample capital and liquidity buffers; strong supervision supports resilience.
  - Vigilance required on bank‑NBFI linkages, cross-border exposures, and vulnerable corporates/households.

### External Sector Assessment (EBA) — key findings and adjustments
- 2025 assessment under revised EBA:
  - External position in 2025 assessed as substantially stronger than level implied by medium-term fundamentals and desirable policies.
  - Current account (CA) balance: 16.7 percent of GDP in 2025 (down from 17.2 percent in 2024).
  - Staff assesses CA gap (adjusting for cyclical and country-specific factors) in range 5.6–9.6 percent of GDP (wide range reflects high uncertainty).
- Staff adjustments to CA norm for Singapore:
  - Health spending adjustment: Singapore public health spending 2.4 percent of GDP in 2024 vs average 6.4 percent → CA norm adjusted downward by 1.4 ppt of GDP.
  - Net foreign assets (NFA) adjustment: NFA 179 percent of GDP at end-2025; granular coefficient approach yields downward adjustment of 3.2 ppt of GDP to the CA norm.
- Quantitative highlights (percent of GDP):
  - 2025 Actual CA 1/: 16.7%
  - 2024 Actual CA 1/: 17.5%
  - 2025 Cyclically Adjusted CA: 17.0%
  - 2024 Cyclically Adjusted CA: 18.0%
  - 2025 EBA CA norm: 14.1%
  - 2024 EBA CA norm: 15.2%
  - 2025 EBA CA Gap: 3.0%
  - 2024 EBA CA Gap: 2.8%
  - 2025 Total Staff Adjustment: 4.6%
  - 2024 Total Staff Adjustment: 2.3%
  - 2025 Health & NFA: 4.6%
  - 2024 Health & NFA: 4.4%
  - 2025 Staff CA gap: 7.6%
  - 2024 Staff CA gap: 5.1%
  - 2025 Assessment: Subst. Stronger
  - 2024 Assessment: Subst. Stronger
  - 1/ 2024 CA was 17.5% at the time of the 2025 ESR (data was revised down to 17.2%).
- REER and NEER:
  - CPI-based REER appreciated by 0.6 percent in 2025 relative to 2024; cumulatively by 17.6 percent since 2020.
  - CPI-based NEER appreciated 1.3 percent in 2025; cumulatively by 13.6 percent since 2020.
- Drivers of CA surplus:
  - Household saving: 17 percent of GDP in 2025 (increase of 8 percentage points since 2000).
  - Corporate saving: about 16.8 percent of GDP in 2025 (declined by around 12 percent of GDP since 2000).
  - Total gross capital formation: fell by 12.7 percentage points from 2000 to 2025.
  - Private household saving in 2025: 17.0 percent of GDP; private corporate saving 16.8 percent; total gross capital formation 22.5 percent of GDP in 2025.
- Policy options to reduce external surpluses:
  - Strengthen social protection and raise public investment to reduce private savings and the CA surplus.
  - Use SINGA to fund infrastructure; SINGA enables issuance up to S$90 billion; outstanding bonds under SINGA ~ S$20 billion (2.4 percent of GDP) as of March 2026.
  - Staff welcomes continued use of bonds under SINGA for qualifying infrastructure projects.

### Authorities’ views and reservations on the EBA assessment
- Authorities fundamentally disagreed with the EBA assessment, arguing external balances reflect structural features of a small, open, trade-oriented economy and role as an intermediary for international trade and foreign-owned multinationals.
- Technical reservations:
  - Standard EBA approaches do not fully capture Singapore’s distinctive characteristics.
  - Health expenditure adjustor and NFA adjustor may misrepresent Singapore’s efficiency and NFA composition.
  - Authorities note CA position is slow-moving and structural; expect downward pressure over time from spending on infrastructure, healthcare, and social protection.

### Financial sector resilience, vulnerabilities, and macroprudential stance
- Overall resilience:
  - Banks: total assets ~500 percent of GDP at end-2025; capital adequacy ratio 18.5 percent in 2025Q2; NPL ratio 1.1 percent in 2025Q2.
  - Three local D-SIBs hold about 54 percent of banking assets.
  - Loan-to-deposit ratios around 66 percent.
  - LCRs and NSFRs above 100 percent; foreign currency LCR exceeded 100 percent at end-2025.
  - Cross-border exposures ~22 percent of total assets.
- Corporate and household positions:
  - Corporate debt: ~160 percent of GDP in 2021Q1 → 117 percent of GDP in 2025Q4.
  - Household debt: 110 percent of personal disposable income.
- Sector vulnerabilities and stress test findings:
  - Corporates: tariff-related shocks and a 100 bps rise in interest rates could lead to significant revenue losses for listed corporates; about 25 percent of corporations may have interest coverage ratio below one or negative cash flow with under 6-month cash buffers; debt of these corporates = 12 percent of total corporate debt.
  - Households: under severe adverse household income fall of 20 percent and mortgage rate increase 100 bps, only 1 percent of households face negative cash flows and depletion of 6-month savings buffers.
  - Banks’ exposure to oil and gas sectors ~10 percent of total loans to non-bank entities.
- Macroprudential/housing:
  - Current macroprudential stance: moderately restrictive and appropriate.
  - Loan-to-value limits: 15–75 percent differentiated by loan characteristics; average LTV for housing loans 42.5 percent in 2025Q4.
  - ABSD rates unchanged since April 2023.
- NBFIs and investment funds:
  - NBFI assets grew 9.7 percent in 2024; account for 20 percent of total financial system assets.
  - Gross leverage of hedge funds: 6.9 times NAV in 2022 → 12.5 times in 2024.
  - A small number of fixed-income funds (3.8 percent of TNA) may face liquidity shortages under stress.
  - Recommendations: strengthen stress testing, enhance oversight on NBFIs, close data gaps on banks–NBFIs linkages.
- Emerging risks and preparedness:
  - Main emerging risks: renewed geopolitical tensions; AI bust; U.S. tariff hikes.
  - Policy actions: strengthen stress testing, enhance NBFI oversight, stand ready to provide liquidity and coordinate with global central banks.

### Macro-structural policies: AI, labor market, inclusivity
- AI strategy:
  - Singapore ranked number one on IMF’s AI Preparedness Index.
  - FY2026 budget: sector-specific AI deployment plans; additional funds 0.6 percent of GDP to the National Research Fund.
  - New programs: “Champions of AI”, expanded Enterprise Innovation Scheme, broadened Productivity Solutions Grant, establishment of new AI Park.
- Labor market and skills:
  - Staff: labor market, especially women and younger workers, highly exposed to AI; about half of highly exposed jobs have high complementarity.
  - Skills imbalance: demand for new IT skills exceeds supply.
  - FY2026 measures: expansion of tech-focused upskilling into non-tech professions; free access to premium AI tools for selected AI courses; SkillsFuture Jobseeker Support scheme (launched April 2025).
- Inclusive growth:
  - Forward Singapore measures: Large Families Scheme; Child LifeSG Credits S$500 per Singaporean child below age 12; extension of SkillsFuture Mid-Career Training Allowance to part-time training; enhanced Workfare Skills Support; Progressive Wage Credit Scheme.
  - Gini coefficient after taxes and transfers: 0.437 in 2015 → 0.379 in 2025.
  - Authorities’ estimate: wealth Gini = 0.55.

### Fiscal policy specifics and BEPS 2.0 implications
- FY2026 budget and stance:
  - FY2026 fiscal surplus envisaged at 1.0 percent of GDP (lower than 1.6 percent in FY2025).
  - Cyclically adjusted primary deficit widens by 0.5 percent of potential GDP relative to FY2025.
  - Expenditure projected to increase from 18.1 percent of GDP in FY2025 to 18.6 percent in FY2026 (development expenditure up 0.7 percent of GDP).
  - Top-ups to endowment and trust funds: 2.2 percent of GDP.
  - Support package in response to war: 0.1 percent of GDP.
  - Staff projects revenue-to-GDP ratio at 19.6 percent in FY2026; corporate income tax receipts 4.4 → 4.5 percent of GDP.
  - Staff assessment: FY2026 fiscal stance broadly appropriate; implementation should be mindful of inflationary risks and target support within budget envelope.
- BEPS 2.0 and Singapore:
  - DTT and MTT implemented; UTPR not implemented.
  - Registration with IRAS commenced May 2026; first GloBE Information Returns due by March 2027.
  - Refundable Investment Credit (RIC) scheme supports substantive activities; companies can receive support up to 50 percent on qualifying expenditure; unutilized credits refunded within four years.
  - Fiscal implications: DTT expected to raise corporate tax collections starting FY2027; staff estimates additional collections ~0.6 percent of GDP in FY2027.
  - Medium-term: Pillar Two reduces tax-rate competition; competition shifts to fiscal tools/incentives.

### Sovereign risk and debt sustainability
- Debt and assets:
  - Debt-to-GDP about 166 percent of GDP at end‑FY2025; large public financial assets → positive net asset position.
  - As of end-FY2025, only about 1 percent of public debt issued for spending purposes under SINGA.
  - RMGS holdings: S$237.1 billion at end‑FY2025.
- DSA assessment:
  - Overall risk of sovereign stress: low.
  - Long-term risks: low.
  - Medium-term risks: low (mechanical signal moderate).
  - Singapore classified as low scrutiny country in DSA framework for market access countries.

### Staff appraisal and final stance
- Outlook restated:
  - Growth projected 5.0 percent (2025) → 3.5 percent (2026); headline inflation 2.6 percent (2026).
  - Second-round inflation effects expected to be contained by anchored inflation expectations and productivity improvements.
- Risks:
  - Growth risks tilted to downside; inflation risks tilted to upside.
- Monetary policy advice:
  - MAS should remain focused on price stability; current stance assessed moderately tight and appropriate under baseline; remain data-dependent and ready to tighten further if second-round inflation pressures emerge.
- Fiscal advice:
  - FY2026 moderately expansionary stance broadly appropriate; avoid broad-based support that could amplify inflationary pressures; use targeted, time-bound support if needed.
- Other:
  - Continue strengthening NBFI oversight, stress testing, contingency planning, and coordination with global regulators.

_Source: IMF staff summary of the 2026 Article IV consultation materials for Singapore (excerpts provided)._

### 1.  Effects of Trade Policy Uncertainty __________________________________________________________ 11

### 1.  Effects of Trade Policy Uncertainty

### Context
- Singapore has been navigating another year of unusually high global uncertainty, including:
  - Transmission from the war in the Middle East through oil price shocks due to Singapore’s reliance on imported energy.
  - Continued uncertainty around future trade actions despite the effective U.S. tariff rate on Singapore remaining at about 3.5 percent, with 67 percent of exports to the U.S. exempted.
  - A global artificial intelligence (AI) boom supporting growth, with risk of an AI bust adversely affecting the electronic sector.
  - Tighter global financial conditions that could test financial stability, including through the non-bank financial sector.
- Singapore entered this environment from a position of strength:
  - Growth averaged 3.9 percent over 2023–25.
  - Inflation has been low and stable, supported by Singapore’s exchange-rate-based monetary policy framework.
  - Financial system resilience is underpinned by a well‑capitalized and liquid banking sector and strong supervisory and regulatory frameworks.
  - Substantial fiscal reserves remain available and have been successfully deployed in large downside shocks such as the COVID pandemic.
- Policy guidance: Economic policies should be calibrated to preserve macroeconomic and financial stability amid rapidly evolving external conditions, while helping to reduce external imbalances over the medium and long term.

### Recent developments
- Growth and output:
  - Growth reached 5.0 percent in 2025.
  - The output gap in 2025 was estimated to be positive at 0.8 percent.
  - Externally oriented tradable sectors drove activity; manufacturing buoyed by a sharp pickup in electronics reflecting the AI-related global technology cycle.
- Trade and external sector:
  - Goods exports: rose from 104.9 percent of GDP in 2024 to 107.9 percent in 2025, driven primarily by re-exports of electronics.
  - Goods imports: rose from 74.9 percent of GDP in 2024 to 78.7 percent in 2025.
  - In 2026Q1, oil and other crude imports fell by 7 and 5 percent y/y, respectively; chemicals exports declined by 6 percent; machinery exports rose 47 percent y/y.
  - Singapore has one of the region’s highest shares of net imports of oil and gas at roughly 7 percent of GDP.
  - In 2025, 39 percent of petroleum oil imports and 26 percent of gas imports were sourced from countries bordering the Strait of Hormuz.
  - Over 90 percent of Singapore’s electricity is generated by imported natural gas.
- Labor market:
  - Unemployment rate: 2.0 percent in 2025, broadly unchanged from 2024.
  - Vacancy-to-unemployment ratio: 1.6 (2025).
  - Wage growth: 5.4 percent (y/y) in 2025Q4.
  - Services unit labor costs rose by 0.6 percent in 2025.
  - Productivity gains in 2025 averaged 6 percent for tradable sectors and 3 percent for nontradable sectors.
  - Advance data: unemployment rate ticked up to 2.1 percent in March 2026; firms’ near-term hiring and wage expectations weakened in March 2026.
- Inflation:
  - Annual headline inflation: 0.9 percent in 2025 (down from 2.4 percent in 2024).
  - MAS core inflation: 0.7 percent in 2025 (down from 2.8 percent in 2024).
  - Headline inflation rose to 1.8 percent in April 2026 due to rising petrol prices and other imported costs.
  - MAS views MAS core inflation of just under 2 percent as consistent with overall price stability.
- Fiscal policy:
  - Fiscal stance neutral in FY2025 (April 2025–March 2026).
  - Fiscal balance (IMF presentation net lending/borrowing): surplus of 1.6 percent of GDP in FY2025 (against a budgeted surplus of 0.4 percent of GDP); FY2024 surplus was 1.2 percent of GDP.
  - Over-performance driven by higher-than-expected revenues (corporate income tax, vehicle quota premia, stamp duties); total expenditure broadly in line with budget.
- Monetary policy and reserves:
  - MAS operates a basket, band, and crawl (BBC) exchange-rate-based monetary policy framework.
  - MAS eased policy in January and April 2025 by slightly reducing the S$NEER’s rate of appreciation; maintained stance July 2025–January 2026; tightened by increasing the S$NEER’s rate of appreciation in April 2026.
  - Weekly average S$NEER appreciated by 1.2 percent in 2025 and by a further 0.4 percent from end-December 2025 to end-April 2026.
  - Net FX purchases increased from US$4 billion in 2024H2 to US$14 billion in 2025H1.
  - Gross international reserves: US$409 billion at end-2025; US$427 billion at end-April 2026; US$371 billion at end-2024 (US$427 billion equals 68 percent of GDP at end-April 2026 as presented).
- Financial conditions:
  - Domestic interest rates: 3-month compounded SORA fell from 2.5 percent in April 2025 to 1.1 percent in March 2026.
  - Average domestic credit growth: picked up from 1.9 percent in 2024 to 5.8 percent in 2025.
  - Financial conditions tightened at the onset of the war in the Middle East, eased in 2025H2, tightened in March 2026, and have since eased with a rebound in equity prices and tighter credit spreads.

### Outlook and projections (baseline and assumptions)
- Baseline assumptions:
  - Energy supply disruptions related to the war in the Middle East are resolved by end-2026.
  - Oil prices increase by roughly 40 percent relative to pre-war levels, averaging $94 per barrel in 2026, $82 in 2027, and moving toward $73 per barrel in 2031.
  - Natural gas price is assumed to increase by 26 percent in 2026.
  - The U.S. effective tariff rate on Singapore assumed constant at 3.5 percent, reflecting the 10 percent U.S. tariffs and associated exemptions.
  - MAS maintains the monetary policy stance following the April 2026 tightening.
  - FY2026 budget is implemented as planned, implying a moderately tight monetary policy stance and a moderately expansionary fiscal policy stance.
- Growth projections:
  - Growth projected to slow from 5.0 percent in 2025 to 3.5 percent in 2026 and 2.7 percent in 2027.
  - Medium term: growth projected to converge to potential growth estimated at 2.5 percent.
  - Output gap: estimated at 0.6 percent in 2026 and projected to close by 2028.
- Inflation projections:
  - Headline inflation projected to rise to 2.6 percent in 2026 due to pass-through from higher energy and food prices.
  - Headline inflation projected to decline to 2.1 percent in 2027.
- Revisions relative to previous forecasts:
  - Singapore: Revisions to Inflation Forecast — October 2025 WEO forecast: 2026 = 1.3 percent, 2027 = 1.9 percent; Pre-war forecast revisions (ppt): +0.3 (2026) and 0.0 (2027); Increase due to the war in the Middle East (ppt): +1.0 (2026) and +0.2 (2027); 2026 AIV baseline forecast: 2.6 percent (2026) and 2.1 percent (2027).
  - Singapore: Revisions to Growth Forecast — October 2025 WEO forecast: 2026 = 1.8 percent, 2027 = 2.5 percent; Pre-war forecast revisions (ppt): +2.2 (2026) and +0.2 (2027); Impact of the war in the Middle East (ppt): -0.7 (2026) and 0.0 (2027); Strong 2026Q1 (ppt): +0.2 (2026); 2026 AIV baseline forecast: 3.5 percent (2026) and 2.7 percent (2027).

### Risks and scenarios
- Risks skewed to the downside with exceptionally high uncertainty:
  - Reescalation of geopolitical tensions in the Middle East could push energy prices higher and keep them elevated beyond mid-2026, raising inflation, causing shortages in fertilizer and petrochemical products, increasing food and input costs, weakening domestic demand, and reducing Singapore’s growth.
  - Protectionist shocks and related policy uncertainty (including the ongoing U.S. Section 301 and Section 232 investigations) could undercut Singapore’s export-oriented economy.
  - An AI and tech cycle bust could reduce demand and investment in technology-related industries, with broader effects on goods trade and aggregate output.
  - A sharper-than-expected tightening of global and domestic financial conditions could amplify shocks by weighing on credit growth.
- Offset and upside possibilities:
  - Earlier-than-envisaged normalization of commodity supply disruptions or easing of trade tensions, combined with stronger-than-expected external demand and positive investor sentiment, could support global growth and continue to boost Singapore’s growth drivers.
  - Medium-term risks are more balanced: increased geoeconomic fragmentation could challenge Singapore’s role as a regional trade and financial hub, while AI adoption may lift potential growth via stronger productivity; aging and climate change present long-term downside risks.

### Policy implications highlighted
- Macroeconomic and financial stability:
  - Economic policies should be calibrated to preserve macroeconomic and financial stability amid rapidly evolving external conditions.
  - Maintain readiness to deploy substantial fiscal reserves if large downside shocks materialize, as done previously.
- Monetary policy:
  - MAS’s exchange-rate-based BBC framework has supported low and stable inflation; MAS tightened policy in April 2026 anticipating MAS core inflation will pick up and remain elevated over the next few quarters.
- Fiscal policy:
  - FY2025 fiscal stance assessed as neutral; FY2026 budget implementation and calibrated fiscal policy should balance supporting growth and containing inflationary pressures.
- Financial sector resilience:
  - The banking sector’s ample capital and liquidity buffers and strong supervision support resilience, but vigilance is required given external risks (geopolitical tensions, potential AI bust, potential new U.S. tariffs) that could trigger financial tightening.

*Source: IMF staff summary of the 2026 Article IV consultation materials for Singapore (excerpts provided).*

### 13.      Singapore’s inflation risks are tilted to the upside. A reescalation of geopolitical tensions

### 13.      Singapore’s inflation risks are tilted to the upside. A reescalation of geopolitical tensions

### Risk assessment and scenario quantification
- Upside inflation risks:
  - A reescalation of geopolitical tensions in the Middle East could trigger a sharp increase in commodity prices, generate second-round effects, and de-anchor inflation expectations amid slowing activity (¶12).
  - Heightened protectionist trade barriers and energy hoarding could disrupt supply chains and raise inflationary pressures.
  - Stronger-than-anticipated AI demand could widen Singapore’s positive output gap and produce sustained inflationary pressure.
- Downside inflation risks:
  - An AI bust could trigger a pullback in tech-related production and investment, easing inflation.
  - A further decline in China’s export prices could weigh on tradable goods prices.
- Staff scenarios (drawing on the April 2026 WEO) (¶14):
  - Severe downside Middle East conflict scenario (Annex V):
    - Oil and gas prices rise by up to 100 and 200 percent, respectively, relative to pre-war levels.
    - The oil price increase corresponds to an average petroleum spot price index of about $110 per barrel in 2026 and about $125 in 2027.
    - Global corporate risk premia increase by 100 bps in 2026 relative to pre-war levels.
    - Global growth brought close to recession territory.
    - Singapore outcomes: growth slows to 2.6 percent in 2026, output gap -0.1 percent in 2026, growth 1.5 percent in 2027; inflation expectations rise well above 2 percent; inflation rises to 3.8 percent in 2026 and 4.3 percent in 2027.
  - Upside coordinated global policy-reset scenario:
    - U.S. tariff removal and fiscal reform, Chinese demand rebalancing, and higher euro area public investment lift Singapore's growth to 4.4 percent in 2026.

### Authorities’ macro views and projections (¶15)
- Authorities’ projections:
  - Growth projected at 2 to 4 percent in 2026.
  - Headline and MAS core inflation projected in the 1.5 to 2.5 percent range.
- Authorities’ assessment:
  - The war in the Middle East expected to directly affect energy-dependent industries and indirectly weigh on activity via higher energy prices, weaker sentiment, and lower domestic and external demand.
  - Growth supported by resilient net exports and investment, reflecting a resilient global technology cycle and a strong pipeline of infrastructure spending.
  - Measures taken: enhanced crisis management, diversified energy sources, strengthened fuel-switching capabilities at power stations, reduced supply-chain chokepoints.
  - Risks: growth risks tilted to the downside; inflation risks tilted to the upside; upside growth risks include a stronger-than-expected technology cycle and higher tourism demand.

### Monetary policy guidance (A. Monetary Policy, ¶16–17)
- Staff assessment:
  - Current monetary policy stance assessed as moderately tight and appropriate under the baseline.
  - Monetary policy should remain focused on price stability and be ready to tighten further if second-round inflation pressures emerge.
  - MAS should remain data-dependent with a tightening bias and clearly communicate policy rationale given high uncertainty.
- Specific guidance if upside inflation and downside growth materialize:
  - Prioritize price stability, limit second-round inflationary pressures, and anchor inflation expectations.
  - Monitor for broadening price pressures, sharp increases in wages and unit labor costs (including services), and rising inflation expectations.
  - Under the severe adverse scenario (¶14), tighten monetary policy to re-anchor inflation expectations; tightening options include steepening the slope of the policy band or upward re-centering of the policy band if more forceful action is required.
  - When growth and inflation move together, respond appropriately to overheating (tighten) or strong disinflation (ease).
- Authorities’ stance (¶18):
  - MAS concurs that the war poses challenges and stresses need for flexible, data-dependent responses.
  - After the April 2026 tightening, MAS assessed the stance as sufficiently tight to temper the inflation shock but will monitor pervasiveness and persistence of inflation.
  - MAS cautioned against overly aggressive tightening if aggregate demand weakens more than expected and emphasized targeted government support and securing energy supplies.

### Fiscal policy stance and details (B. Fiscal Policy, ¶19–22)
- FY2026 budget and stance:
  - FY2026 fiscal surplus envisaged at 1.0 percent of GDP, lower than the surplus of 1.6 percent of GDP recorded in FY2025.
  - Budget implies a moderately expansionary fiscal policy stance; cyclically adjusted primary deficit widens by 0.5 percent of potential GDP relative to FY2025.
  - Expenditure projected to increase from 18.1 percent of GDP in FY2025 to 18.6 percent of GDP in FY2026, mainly due to an increase in development expenditure by 0.7 percent of GDP.
  - Top-ups to endowment and trust funds amount to 2.2 percent of GDP (primarily for airport development and R&D).
  - Authorities rolled out a support package worth 0.1 percent of GDP in response to the war in the Middle East.
  - Staff projects the revenue-to-GDP ratio at 19.6 percent in FY2026; corporate income tax receipts forecast to increase from 4.4 to 4.5 percent of GDP.
- Fiscal policy recommendations:
  - Under the baseline, the FY2026 fiscal stance is broadly appropriate.
  - Implementation should be mindful of inflationary risks; further support should be targeted to households and businesses affected by the war and provided within the budget envelope (reallocate less essential and untargeted spending).
  - Automatic stabilizers should operate if revenue declines as growth slows.
  - Avoid broad-based fiscal support that could increase aggregate demand and fuel inflationary pressures.
  - Fiscal policy should focus on removing supply-side constraints via infrastructure investment, regulatory changes, and productivity enhancements.
  - In a major downside shock, Singapore has substantial fiscal space: government owns large financial assets (net of government debt) amounting to 85 percent of GDP as of end-March 2024; prompt and time-bound targeted support would be appropriate.
  - In an upside shock with revenue outperformance, revenue windfalls should be saved (automatic stabilizers to operate).

### Medium-term fiscal planning and other structural points (¶22)
- Recent tax and medium-term considerations:
  - Implementation of the Multinational Enterprise Top-up Tax and the Domestic Top-up Tax (OECD BEPS 2.0), setting minimum effective tax rate for in-scope MNEs at 15 percent, likely to bring near-term revenue gain starting in FY2027.
  - AI-led tech cycle poses upside and downside potential for tax revenues.
  - Medium-term spending needs (strengthening social protection, infrastructure, climate transition, healthcare for aging population) warrant periodic updates.
  - Staff recommends authorities update, clearly communicate, and publish medium-term fiscal plans.

### Box summary: Trade Policy Uncertainty (Box 1)
- Global trade policy uncertainty (TPU) at historic highs; staff developed granular TPU measures distinguishing protectionist TPU vs. agreement TPU, and own vs. third-party TPU for six ASEAN economies including Singapore.
- Empirical findings:
  - Own protectionist TPU shocks (TPU one standard deviation above mean) temporarily reduce output per capita for ASEAN economies.
  - Third-party TPU shocks generate larger declines in output per capita on average; higher trade openness buffers economies from third-party TPU shocks.
  - At the 90th percentile of trade openness, consistent with Singapore’s level, third-party TPU effects on output per capita become statistically insignificant.
  - Own agreement TPU shocks temporarily lift output via anticipatory investment, but effects fade and do not deliver durable trade balance improvements.

*Source: IMF staff report (Singapore Article IV consultation, chapter content provided).*

### 23.      The authorities agreed with the thrust of staff’s assessments. They have provided

### 1sgpea2026001 - 23.      The authorities agreed with the thrust of staff’s assessments.

### Fiscal policy, wartime support, and medium-term fiscal outlook
- Authorities provided additional support to households and businesses affected by the war in the Middle East, with projected increases to the overall FY2026 budget, and expressed readiness to do more if required.
- Design principles of additional support:
  - Support should be targeted to the extent possible, while recognizing a trade-off between speed of implementation and extent of targeting.
  - Additional support has been designed to avoid distorting price signals, allow market prices to adjust, and allow firms to pass through costs to customers.
- Inflation and fiscal stance:
  - Authorities agreed fiscal policy should avoid fueling inflationary pressures amid the energy shock.
  - Authorities assessed that inflationary risk of the carefully calibrated support measures is low given that the fiscal multiplier in Singapore is relatively small.
- Medium-term fiscal pressures and projections:
  - Corporate income tax collections are expected to increase in line with Singapore’s implementation of the BEPS 2.0 initiative.
  - Expenditure will rise further to tackle structural transformations, with AI identified as the most immediate one.
  - Over the medium term, substantial costs are expected for climate adaptation (such as coastal flood protection), rejuvenating aging infrastructure (such as public housing), and rising public healthcare spending due to population aging.
  - An update to the medium-term fiscal projections is currently underway, to be completed in 2027.

*Italic source: Content unit from 1sgpea2026001 - 23.*

### External Sector Assessment (EBA) methodology and application to Singapore
- IMF revised its External Balance Assessment (EBA) methodology in 2026:
  - Focused on updating data and coefficients through 2023 and reducing the set of demographic indicators.
  - Use of the inflation bias adjustor to quantitatively address a measurement issue for net foreign assets is discontinued.
  - While Singapore is excluded from the EBA regression sample as an outlier, the EBA model’s estimated coefficients are applied to Singapore.
- 2025 assessment under the revised EBA:
  - Singapore’s external position in 2025 continues to be assessed as substantially stronger than the level implied by medium-term fundamentals and desirable policies.
  - Singapore recorded a current account (CA) balance of 16.7 percent of GDP in 2025, down from 17.2 percent in 2024 and below the average of 17.6 percent over the decade from 2015–24.
  - Staff assesses the CA gap (adjusting for cyclical and country-specific factors) to be in the range of 5.6–9.6 percent of GDP; the wide range reflects high uncertainty.
- Methodology-driven changes to the CA gap:
  - Removal of the inflation bias adjustor raises the CA gap by 5 percent of GDP relative to prior assessments.
  - Dropping Singapore’s portfolio equity retained earnings adjustor reduces the CA gap by about 3 percent of GDP.
- EBA policy gap drivers:
  - Identified EBA policy gap in 2025 largely reflects Singapore’s more contractionary fiscal policy compared to the rest of the world.
  - Staff analysis suggests the Central Provident Fund (CPF) defined contribution pension scheme explains around 1.6 percent of GDP of the EBA residual.

*Italic source: Content unit from 1sgpea2026001 - 23.*

### Adjustments to the CA norm for Singapore
- Two continuing staff adjustments to Singapore's EBA CA norm:
  - Health spending adjustment:
    - Singapore’s public health spending was 2.4 percent of GDP in 2024, compared to an average of 6.4 percent of GDP in the EBA sample economies.
    - Because lower realized and desirable public health spending in Singapore reflects high efficiency rather than under-provision, the CA norm is adjusted downward by 1.4 ppt of GDP.
  - Net foreign assets (NFA) adjustment:
    - Singapore’s NFA amounted to 179 percent of GDP at end-2025.
    - Singapore runs a primary income deficit rather than surplus because its balance sheet is tilted toward safer, lower-yielding assets and FDI-heavy liabilities linked to foreign-owned multinationals.
    - Contributions of NFA to Singapore’s CA norm are estimated using granular coefficients on asset and liability components, resulting in a downward adjustment of 3.2 ppt of GDP to the CA norm.

*Italic source: Content unit from 1sgpea2026001 - 23.*

### Quantitative table highlights (EBA-derived metrics)
- (In percent of GDP)
  - 2025 Actual CA 1/: 16.7%
  - 2024 Actual CA 1/: 17.5%
  - 2025 Cyclically Adjusted CA: 17.0%
  - 2024 Cyclically Adjusted CA: 18.0%
  - 2025 EBA CA norm: 14.1%
  - 2024 EBA CA norm: 15.2%
  - 2025 EBA CA Gap: 3.0%
  - 2024 EBA CA Gap: 2.8%
  - 2025 Total Staff Adjustment: 4.6%
  - 2024 Total Staff Adjustment: 2.3%
  - 2025 Health & NFA: 4.6%
  - 2024 Health & NFA: 4.4%
  - 2025 Measurement error: -
  - 2024 Measurement error: -2.1%
  - 2025 Inflation bias: -
  - 2024 Inflation bias: -5.5%
  - 2025 Portfolio retained earnings: -
  - 2024 Portfolio retained earnings: 3.4%
  - 2025 Staff CA gap: 7.6%
  - 2024 Staff CA gap: 5.1%
  - 2025 Assessment: Subst. Stronger
  - 2024 Assessment: Subst. Stronger
  - 1/ 2024 CA was 17.5% at the time of the 2025 ESR (data was revised down to 17.2%).

*Italic source: Content unit from 1sgpea2026001 - 23.*

### Exchange rate developments and current account dynamics
- REER and NEER movements:
  - CPI-based real effective exchange rate (REER) appreciated by 0.6 percent in 2025 relative to 2024, and cumulatively by 17.6 percent since 2020.
  - CPI-based NEER appreciated 1.3 percent in 2025 and cumulatively by 13.6 percent since 2020.
- Despite broad-based appreciation, CA balance remained elevated:
  - Average CA balance from 2021–25 was 17.7 percent of GDP, up from the 2016–20 average of 17.1 percent.
- Monetary policy framework:
  - While REER is expected to continue appreciating over time, this medium- and long-term trend should not directly affect short-term NEER movements, which are controlled to achieve price stability under the BBC monetary policy framework.

*Italic source: Content unit from 1sgpea2026001 - 23.*

### Saving, investment, demographics, and structural drivers of the CA surplus
- Key trends and levels:
  - Household saving as percent of GDP increased by 8 percentage points between 2000 and 2025 to reach 17 percent.
  - Estimated corporate saving ratio declined by around 12 percent of GDP from 2000 to 2025 but remained around 16.8 percent of GDP in 2025.
  - Total gross capital formation as a share of GDP fell by 12.7 percentage points from 2000 to 2025.
  - Foreign-owned multinationals accounted for 31.0 percent of GDP in 2020.
- Structural drivers of private household consumption:
  - Singapore’s old age dependency ratio is lower than in other advanced economies at present, supporting higher saving under the life-cycle model.
  - Singapore’s relatively lower labor share (due to a large corporate sector) means a smaller portion of resources accrue to domestic households.
  - Other important factors: higher real GDP per capita, financial center status, and lower household credit to GDP.
- Historical drivers (Box 2 summary):
  - Current account peaked at 27.1 percent of GDP in 2007.
  - Private household saving at 17.0 percent of GDP in 2025, roughly double its 2000 level.
  - Estimated private corporate saving at 16.8 percent of GDP in 2025.
  - Total gross capital formation declined from 35.2 percent of GDP in 2000 to 22.5 percent in 2025.
  - Public net saving-investment balance was 2.3 percent of GDP in 2025.

*Italic source: Content unit from 1sgpea2026001 - 23.*

### Policy options to reduce external surpluses over the medium term
- Strengthening social protection and raising public investment can reduce private savings and the CA surplus:
  - Recent enhancements include:
    - Temporary financial support scheme for involuntarily unemployed workers (SkillsFuture Jobseeker Support).
    - Enhancements to the CPF for retirement adequacy and inclusion of platform workers under the CPF.
    - Expanded Workfare Income Supplement for low-wage workers.
    - Increased Silver Support payouts for elderly citizens.
  - Remaining gaps noted by staff:
    - Retirement adequacy concerns for low-income and self-employed workers.
    - Healthcare affordability challenges, especially for chronic issues and long-term care.
    - Unemployment support limited in duration and coverage compared to other advanced economies.
  - Development spending and infrastructure financing:
    - Contributions to specific funds (Future Energy Fund, Coastal and Flood Protection Fund, Changi Airport Development Fund) in FY2023–25 totaled 2.7 percent of 2025 GDP.
    - Singapore Infrastructure Government Loan Act (SINGA) enables issuance of special bonds up to S$90 billion; as of March 2026, outstanding bonds under SINGA amounted to approximately S$20 billion (2.4 percent of GDP).
    - Staff welcomes continued use of bonds under SINGA as they allow qualifying infrastructure projects to be funded via an overall budget deficit without breaching Singapore’s balanced budget rule.

*Italic source: Content unit from 1sgpea2026001 - 23.*

### Authorities’ views and reservations on the EBA assessment
- Authorities’ main positions:
  - Fundamentally disagreed with Singapore’s EBA-based external sector assessment.
  - Argued Singapore’s external balances reflect structural features of a small, highly open, and trade-oriented economy; higher saving and investment abroad are necessary for national wealth in absence of natural endowments.
  - Emphasized role as an intermediary for international trade and reliance on foreign-owned multinationals; trade surplus and factor income outflows should be interpreted in that structural context.
  - Large NFA position is a functional equivalent of land mass and natural resources for larger nations; appropriate assessment should consider Singapore-specific circumstances rather than average norms.
  - Asserted no evidence of systematic underinvestment domestically; Singapore invests substantially in infrastructure, housing, healthcare, education, and climate adaptation while maximizing outcomes with fiscal discipline.
- Technical reservations:
  - Standard EBA approaches do not fully capture Singapore’s distinctive characteristics; greater transparency on treatment of country-specific factors and model adjustors is important.
  - Health expenditure adjustor may penalize Singapore’s high healthcare efficiency and outcomes.
  - NFA adjustor may not adequately reflect the economically sound basis for Singapore's NFA composition driven by multinational enterprise investment and foreign capital.
  - If the adjustors are removed, the CA gap could vary by nearly 5 percentage points and, with the ±2 percentage point range, Singapore’s external balance could range from “substantially stronger” to “broadly in line.”
- Convergence expectations:
  - Authorities view the CA position as slow-moving and driven by structural characteristics that will evolve over time to reduce the surplus.
  - Authorities share IMF’s view that continued investment in infrastructure, healthcare, and social spending is a priority and will exert downward pressure on the surplus over time.
  - Aggregate savings expected to decline as households age and dissave; public sector net savings gap expected to narrow as growth slows and government expenditure increases.
  - Current monetary policy settings do not have bearing on the medium-term trajectory of the CA balance.

*Italic source: Content unit from 1sgpea2026001 - 23.*

### Financial sector resilience and macroprudential stance
- Overall resilience:
  - Financial sector remains resilient and systemic risks are contained.
  - Banks are well-capitalized, liquid, and profitable, supported by strong asset quality.
  - MAS’ stress tests indicate overall resilience of banks and NBFIs.
  - Negative credit gap is expected to close gradually.
  - Systemic risks from the housing sector are contained due to tight macroprudential settings.
  - Continued vigilance warranted on bank-NBFI linkages, cross-border exposures, and pockets of vulnerable corporates and households.
- FSAP follow-up and supervisory enhancements:
  - In response to 2019 FSAP recommendations, MAS enhanced supervision on U.S. dollar liquidity for D-SIBs, strengthened resolution tools, devoted more resources to oversee payment systems, and taken steps to mitigate cyber risks.
  - Forthcoming FSAP update, commencing in July 2026, will undertake in-depth quantitative analysis for systemic risk assessment and policy review.
- Banking sector metrics and exposures:
  - Singaporean banks held total assets amounting to around 500 percent of GDP at end-2025.
  - Cross-border exposures were around 22 percent of total assets, mostly across loans and advances (13 percent) and security and equity holdings (6 percent).
  - Exposure to the Americas increased substantially in 2025.
  - Banks’ capital adequacy ratio was 18.5 percent in 2025Q2.
  - NPL ratio was 1.1 percent in 2025Q2.
  - Three local Domestic Systemically Important Banks (DSIBs) hold about 54 percent of banking assets and maintain strong credit ratings; MAS stress tests show DSIBs’ capital levels remain robust under severe stress scenarios.
  - Loan-to-deposit ratios have been stable at around 66 percent for both local and foreign currencies.
  - Liquidity coverage ratios (LCRs) of DSIBs and major foreign subsidiaries were firmly above 100 percent; aggregate net stable funding ratio also above 100 percent.
  - For all DSIBs, LCR in foreign currency exceeded 100 percent at end-2025.
  - Cross-border liquidity risks exist due to reliance on interbank borrowing (21 percent of total liabilities) and non-resident deposits (16 percent).
  - Banks increased their gross debt position in the non-resident interbank market by 11.3 percent year-on-year at end-January 2026.
- Household and corporate balance sheets:
  - Corporates strengthened financial positions, cash buffers, and debt repayment capacity.
  - Corporate debt declined from around 160 percent of GDP in 2021Q1 to 117 percent of GDP in 2025Q4.
  - MAS’ stress test indicates a segment of corporates remains vulnerable to higher U.S. tariffs.

*Italic source: Content unit from 1sgpea2026001 - 23.*

### 4.5 percent.

### 4.5 percent.

### Financial sector resilience and vulnerabilities
- Corporates:
  - Corporates listed under the Singapore Stock Exchange face tariff-related shocks and a 100 bps rise in interest rates that leads to a significant revenue loss by up to 50 percent (the average revenue loss at 10 percent).
  - About 25 percent of corporations may have an interest rate coverage ratio below one or negative cash flow with under 6-month cash buffers.
  - The debt held by these corporates accounts for 12 percent of total debt held by corporates.
- Households:
  - Household debt declined to 110 percent of personal disposable income and is well below total liquid assets held by households.
  - MAS’ 2025 stress test indicates that, under an adverse scenario where household income falls by 20 percent and mortgage rates increase by 100 basis points, only 1 percent of households face negative cash flows and depletion of 6-month savings buffers.
- Banks:
  - Singaporean banks have shown resilience against past commodity price shocks and have adequate provision coverage for non-performing assets (NPA).
  - Banks’ exposure to the oil and gas sectors (including upstream, midstream, downstream, and supporting services) is about 10 percent of total loans to non-bank entities.
  - D-SIBs hold sufficient FX liquidity; MAS maintains operational readiness and has test traded to confirm ready access to U.S. dollars through the Federal Reserve’s FIMA Repo Facility.
- Liquidity and contingency:
  - MAS maintains readily deployable liquidity and funding facilities, including Emergency Liquidity Assistance and access to the FIMA Repo Facility.
  - MAS should continue to closely monitor banks’ LCR ratios and developments in core foreign currency funding markets.

### Housing market and macroprudential settings
- Market developments:
  - The housing market has been stable, with the increase in house prices slowing down in 2025 and picking up moderately in 2026Q1.
  - Under the baseline, credit growth is projected to slow due to reduced activities in energy-dependent sectors, amid tightening financial conditions, but the negative credit gap (¶10) is expected to close gradually.
- Macroprudential framework:
  - The macroprudential settings remain tight, and staff assesses that the current macroprudential settings remain appropriate given the narrowing credit gap, contained systemic risks from the housing market, and heightened uncertainty.
  - MAS maintains macroprudential measures such as limits on the loan-to-value ratio (at 15–75 percent, differentiated by loan characteristics) and total debt service ratio (at 55 percent). No changes for these limits have been made since the 2025 Article IV consultation.
  - The average loan-to-value ratio for housing loans has been stable at 42.5 percent in 2025Q4.
  - Additional Buyer’s Stamp Duty (ABSD) rates unchanged since April 2023; staff recommendations on residency-based distinction with ABSD rates remain unchanged from the 2024 Article IV consultation.
- Policy recommendations:
  - Authorities should stay flexible with adjusting the settings to address shifts in the housing market.
  - Expanding public housing supply and closely monitoring interaction between public and private housing markets remain key to addressing structural imbalances and potential risks.

### Non-bank financial institutions (NBFIs) and investment funds
- Sector size and linkages:
  - Domestic NBFIs consist mainly of investment funds, trust companies, and insurance corporations.
  - NBFI assets grew by 9.7 percent in 2024, accounting for 20 percent of total financial system assets.
  - As of March 2026, NBFIs account for about 16 percent of banking system assets, and about 18 percent of banks’ total liabilities.
- Leverage and exposures:
  - Gross leverage ratio of hedge funds doubled from 6.9 times net asset value in 2022 to 12.5 times in 2024.
  - NBFIs’ exposure and leverage in the OTC derivative markets have been increasing over time.
  - Private credit funds constituted 1 percent of asset under management by investment and trust funds domiciled in Singapore in 2023.
- Liquidity and stress testing:
  - Investment funds have maintained adequate cash buffers and have successfully met increased redemption requests since April 2025.
  - MAS’ 2025 stress test shows most authorized investment funds would be able to meet redemptions even under a severe redemption shock, but a small number of fixed-income funds that account for 3.8 percent of total net assets (TNA) may face liquidity shortages.
- Recommendations:
  - Continue to strengthen stress testing and enhance oversight on NBFIs.
  - Strengthen risk analysis for NBFIs through updated stress tests and cash-flow-based liquidity assessments for D-SIBs.
  - Further efforts to close data gaps on linkages between banks, NBFIs, and corporates to enable more comprehensive vulnerability assessments.

### Emerging risks and recommended preparedness
- Main emerging risks:
  - Renewed geopolitical tensions (reescalation of the conflict in the Middle East).
  - A bust of a global AI boom.
  - U.S. tariff hikes.
- Potential impacts:
  - Reescalation of the Middle East conflict would disrupt commodity markets and supply chains, impacting D-SIBs’ domestic and cross-border exposures to corporates, especially in manufacturing, wholesale trade and utilities.
  - A potential global AI bust could negatively affect banks and NBFIs through exposures tied to AI-linked firms and data center investment.
  - Increased U.S. tariffs could lead to significant revenue losses and negative cash flows for vulnerable corporates.
  - These risks could further tighten global financial conditions, pose risks to banks’ FX funding, and trigger redemption pressures on investment funds due to asset sell-offs.
- Policy actions:
  - Continue to strengthen stress testing, enhance oversight on NBFIs, and proactively engage in contingency planning.
  - Update stress testing to assess potential unraveling of interconnected risks and implications for credit and liquidity risks.
  - Strengthen oversight of liquidity risks with NBFIs and continue supervisory engagement with fund managers.
  - MAS should stand ready to provide liquidity in severe market stress while actively coordinating with global central banks as needed.

### Anti–money laundering/combating the financing of terrorism (AML/CFT)
- Assessment and challenges:
  - Singapore’s overall capacity to address ML/TF risks is high; institutional capacity and enforcement are well developed.
  - The 2026 FATF assessment concluded the system is highly coordinated and technologically advanced, demonstrating strong international cooperation and responsiveness to evolving ML/TF risks, though key challenges remain.
  - Recent cases highlight the need for deeper understanding of typologies of cross-border illicit financial flows, including those related to crypto assets.
- Recommendations:
  - Strengthen risk understanding and effective implementation of the framework to ensure consistent and effective risk-based supervision.
  - Enhance beneficial ownership transparency to limit misuse of legal persons.
  - Strengthen oversight of the wealth management sector.
  - Deepen international and domestic coordination across AML/CFT, prudential, and financial stability functions.
  - Further strengthen implementation of the legal cross-border cash reporting framework.

### Macro-structural policies: AI, labor market, and inclusive growth
- AI strategy and public investment:
  - Singapore ranked number one on the IMF’s AI Preparedness Index.
  - FY2026 budget initiated sector-specific AI deployment plans focusing on advanced manufacturing, connectivity, finance, and healthcare.
  - The budget devoted additional funds (0.6 percent of GDP) to the National Research Fund.
  - New programs: “Champions of AI” program; expansion of the Enterprise Innovation Scheme to allow tax deductions for qualifying AI expenditures; broadened Productivity Solutions Grant; establishment of a new AI Park.
- Labor market and skills:
  - Staff analysis shows Singapore’s labor market, and in particular women and younger workers, is highly exposed to AI.
  - About half of the highly exposed jobs are also rated as having high complementarity, suggesting material productivity upside for some workers.
  - There is a skills imbalance: demand for new IT skills exceeds supply of graduates with new skills.
  - FY2026 measures: expansion of tech-focused upskilling programs into non-tech professions, free access to premium AI tools for Singaporeans in selected AI courses, and the SkillsFuture Jobseeker Support scheme (launched April 2025) providing temporary financial support for involuntarily unemployed individuals with integrated active labor market programs.
  - Authorities will study potential expansion of the SkillsFuture Jobseeker Support Scheme.
- Inclusive growth:
  - Forward Singapore initiative measures include the Large Families Scheme, Child LifeSG Credits (S$500 per Singaporean child below age 12), extension of SkillsFuture Mid-Career Training Allowance to part-time training, higher income thresholds for preschool and student-care subsidies, enhanced Workfare Skills Support, and the Progressive Wage Credit Scheme.
  - Income inequality has improved: the Gini coefficient after taxes and transfers fell from 0.437 in 2015 to 0.379 in 2025.
  - Authorities estimate the Gini coefficient for wealth inequality is 0.55.

### Staff appraisal: outlook, risks, and policy stance
- Outlook:
  - Growth is projected to slow from 5.0 percent in 2025 to 3.5 percent in 2026 as higher input prices and supply chain disruptions from the war in the Middle East put pressure on energy-intensive industries, compress real incomes, and tighten financial conditions.
  - Headline inflation is projected to rise to 2.6 percent in 2026, reflecting pass-through from higher energy and food prices.
  - Broader second-round inflation effects are expected to be contained by stable inflation expectations and ongoing productivity improvements.
- Risks:
  - Risks to growth are tilted to the downside and to inflation are tilted to the upside, mainly from external factors (Middle East geopolitical tensions, global trade tensions, a bust of the AI boom).
  - These risks may trigger a sharper-than-expected tightening of global and domestic financial conditions.
- Monetary policy advice:
  - MAS should remain focused on price stability.
  - Staff assesses the current monetary policy stance as moderately tight and appropriate under the baseline, given the positive output gap, a gradually normalizing but still tight labor market, and the need to keep inflation expectations anchored.
  - Given significant upside risks to inflation, MAS should remain data-dependent and stand ready to tighten further if second-round inflationary pressures emerge, with due regard to broader domestic conditions.

*Source: 4.5 percent.*

### 44.      The moderately expansionary fiscal stance implied by the FY2026 budget is broadly

### The moderately expansionary fiscal stance implied by the FY2026 budget is broadly appropriate.

### Fiscal policy stance and implementation
- The FY2026 budget implies a moderately expansionary fiscal stance that is "broadly appropriate."
- Higher development spending and a smaller fiscal surplus align with prior staff recommendations to gradually reduce fiscal surpluses to accommodate rising medium-term spending needs.
- Implementation caveats:
  - Continue to be mindful of inflationary risks during budget execution.
  - If more adverse energy shocks materialize, authorities should stand ready to provide targeted and time-bound support to affected households and businesses.
  - Singapore has fiscal space to respond to major downside shocks, but broad-based fiscal support should be avoided to not amplify inflationary pressures.

### External position
- Assessment for 2025:
  - Singapore’s external position in 2025 is assessed as substantially stronger than the level implied by medium-term fundamentals and desirable policies.
  - The large current account surplus reflects significant private household savings, driven by structural, slow-moving factors such as demographics.
- Policy implications:
  - Continued efforts to strengthen social protection and infrastructure spending can support external rebalancing in the medium and long run.

### Financial sector resilience and risks
- Systemic assessment:
  - Singapore’s financial sector remains resilient and systemic risks are contained.
  - Banks are well-capitalized, profitable, and liquid.
  - Macroprudential settings remain appropriately tight, mitigating systemic risks from the housing sector.
- Emerging risk vigilance and recommended actions:
  - Staff welcomes the authorities’ efforts to strengthen vigilance, stress testing, and contingency planning against emerging risks from:
    - a reescalation of geopolitical tensions in the Middle East,
    - a bust of the AI boom,
    - a rise in global trade tensions, and
    - a tightening in global financial conditions.
  - MAS should continue to strengthen oversight of NBFIs, including liquidity risks and leverage, and enhance data coverage on banks-NBFIs linkages.
  - In case of severe market stress, MAS should stand ready to provide liquidity in coordination with global central banks.

### Inclusive growth and labor-market transition
- AI and growth strategy:
  - AI has been turned into a national growth strategy, with the FY2026 budget appropriately supporting AI adoption by firms.
- Labor market policies:
  - As the labor market transition unfolds, staff welcomes the authorities’ efforts toward re-skilling and upskilling of Singapore’s workforce.

*Source: IMF staff assessment as presented in the provided content unit.*

### 48.      It is recommended that the next Article IV consultation with Singapore be held on the

### 1sgpea2026001 - 48.      It is recommended that the next Article IV consultation with Singapore be held on the

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

### Real sector developments
- Real GDP grew strongly by 5.0 percent in 2025, driven by private consumption, investment, and net exports.
- Momentum continued in 2026Q1 despite the war in the Middle East.
- Strong manufacturing growth in 2025 reflected a still-strong AI-related global technology cycle, which continued in 2026Q1.
- Electronics exports increased strongly, especially for re-exports; domestic exports also ticked up.
- Unemployment remained low; employment growth picked up in 2025H2 but moderated slightly in 2026Q1.

### External sector and balance of payments
- The current account surplus decreased to 16.7 percent of GDP in 2025 due to a decline in the goods surplus.
- Net international investment position increased in 2025, reflecting Singapore’s strong external position.
- Singapore has a net asset position in portfolio investment and a net liability position in FDI holdings.
- Gross official reserves continued to increase.
- Selected figures (Table 1 and Table 2):
  - Nominal GDP (2025): US$604.3 billion
  - Population (2025): 6.1 million
  - GDP per capita (2025): US$98,878
  - Current account balance (US$ billions): 2025 = 100.9
  - Current account (percent of GDP): 2025 = 16.7
  - Goods balance (US$ billions): 2025 = 176.2
  - Exports, f.o.b. (US$ billions): 2025 = 652.1
  - Imports, f.o.b. (US$ billions): 2025 = -475.8
  - Gross official reserves (US$ billions, end of period): 2025 = 409.3
  - Gross official reserves (in months of imports): 2025 = 5.1

### Labor market and wages
- Residents’ labor force participation rate continued to decline in 2025 due to aging.
- Employment growth in 2025 was driven by non-residents, at a slightly higher pace than in 2024.
- Wage growth increased in 2025, reflecting a tight labor market.
- Job vacancy to unemployed person ratio remains above its pre-pandemic average.
- Retrenchments ticked up in 2025, mostly from services sectors.
- Non-resident workforce growth in 2025 was driven by work permit holders in the construction sector.

### Inflation and prices
- Disinflation advanced in 2025H1 but inflation ticked up since mid-2025.
- Nontradable services inflation increased due to higher private health insurance costs.
- Following the war in the Middle East, domestic energy prices started to rise.
- Inflation expectations based on consensus forecasts remain well anchored.
- Specific inflation figures (Table 1):
  - CPI inflation (period average): 2025 = 0.9 percent
  - CPI inflation (end of year): 2025 = 2.6 percent
  - CPI inflation excluding food and energy (period average, IMF staff estimate): 2025 = 0.7 percent
  - MAS core inflation (period average, IMF staff estimate): 2025 = 0.7 percent

### Monetary and financial conditions
- Financial conditions tightened at the outset of the war in the Middle East, but have loosened since.
- Domestic interest rates declined in 2025 and 2026H1; the decline outpaced that of U.S. interest rates.
- Real government bond yields fell to negative territory as inflation ticked up in 2025H2.
- Broad money continued to grow in 2025.
- Singapore stock market performed well in 2025 and 2026Q1.
- Domestic credit growth picked up in 2025, reflecting robust economic activity and low interest rates.

### Banking sector
- Singaporean banks held total assets amounting to around 500 percent of GDP at end-2025.
- Banks rely on deposits and cross-border interbank borrowing for funding.
- Loans to corporates exceed housing and consumer loans.
- Banks’ asset quality is solid overall; NPL ratios for certain sectors remain relatively high.
- Deposits: demand and savings deposits grew in 2025, while fixed deposits declined.
- Loans-to-deposit ratios remain healthy and stable for both domestic and foreign currencies.
- Financial soundness indicators (Table 7):
  - Regulatory tier I capital to risk-weighted assets (2025): 17.5 percent
  - NPL ratio (local banks, 2025, latest available): 1.1 percent
  - Capital adequacy ratio of local banks (2025, latest available): 16.9 percent
  - Three-month S$ SORA (percent, end of period, 2025): 1.2

### Housing market and household balance sheets
- Private residential prices kept pace with income growth; rental markets stabilized.
- Private residential transaction volume increased in 2025; public housing resale volume decreased.
- Vacancy rates in the private market fell in 2025.
- Private housing stock is expected to increase in coming years.
- House price-to-rent ratio stayed elevated in 2025; house price-to-income ratio remained stable.
- Household debt picked up slightly in 2025 amid lower mortgage rates but remains low compared to peers.
- Households’ balance sheets remained strong: net wealth above 400 percent of GDP and liquid assets well above debt.
- Banks’ exposure to housing stabilized; NPLs for housing loans are low and loan-to-value ratios remained stable.

### Spillovers and external linkages
- Singapore depends on foreign final demand from the Chinese mainland, the EU, the U.S., and regional partners.
- FDI originates mainly from the U.S. and the EU.
- Singapore residents hold large portfolio external assets, mainly in the U.S.
- Major sources of funding for Singapore’s financial sector include East Asian banks and European banks.
- Cross-border lending distributed across Americas, Asia, and Europe; cross-border exposures of Singaporean banks to greater China, the U.S., and Japan remained high.

### Demographics, social, and equality indicators
- Old-age dependency is projected to increase significantly in the medium to long term.
- Labor force participation of women and those 60 and older has risen, with scope for further improvement.
- Low and mid-skilled workers saw higher wage growth than high-skilled workers in 2025.
- Median and average household income rose in real terms.
- Inflation in 2025 disproportionately affected higher income groups.
- Income inequality, measured by Gini indices, continued to decline in 2025.

### Key medium-term projections (selected)
- Real GDP growth projections (percent change):
  - 2025 = 5.0
  - 2026 = 3.5
  - 2027 = 2.7
  - 2028–2031 (annual) = 2.5, 2.5, 2.5, 2.5
- Current account (percent of GDP):
  - 2025 = 16.7
  - 2026 = 16.7
  - 2027 = 16.6
- Gross official reserves (US$ billions):
  - 2025 = 409
  - 2026 = 443
  - 2027 = 507

*Source: Data provided by the Singapore authorities; and IMF staff estimates and projections.*

### Annex I. Staff Policy Advice from the 2025 Article IV Consultation

### Annex I. Staff Policy Advice from the 2025 Article IV Consultation

### Fiscal Policy
- Findings
  - The expansionary fiscal stance in the FY2025 budget, which includes targeted and untargeted measures to support households and businesses as well as structural spending including on high-quality and resilient infrastructure, will help support economic activity amid a challenging external environment.
  - Due to stronger-than-expected economic growth in 2025 and the associated improved tax collections, the fiscal stance for FY2025 is now assessed to have been neutral rather than expansionary as originally envisaged in the budget.
  - Development expenditure increased to 3.4 percent of GDP in FY2025 from 3.0 percent of GDP in FY2024.
  - The fiscal balance in FY2025 recorded a higher surplus than in FY2024 amid stronger-than-expected economic growth.
  - The budget for FY2026 envisages lower direct transfers to households and businesses, in line with staff advice.
  - The authorities continue to make use of SINGA and stand ready to deploy additional support in case of downside risks.
- Policy recommendations
  - Accommodate rising medium-term spending needs by reducing the fiscal surplus over time within the government’s balanced budget rule.
  - Gradually phase out or better target currently untargeted transfers.
  - Increase spending on high-quality infrastructure projects, including by issuing bonds under SINGA.
  - If downside risks to growth materialize, deploy temporary and targeted fiscal support, leveraging Singapore’s substantial fiscal space.

### Monetary, Exchange Rate, and Financial Policies
- Findings
  - Staff recommends further easing in view of ongoing disinflationary pressure, recent weak inflation outturns, slowing growth, and a forecasted negative output gap.
  - MAS should remain vigilant and data dependent with respect to the speed and magnitude of easing in light of the large uncertainty, as well as both upside and downside risks around the inflation outlook.
  - MAS should be ready to increase its pace of easing should downside inflation risks begin to materialize.
  - MAS maintained the monetary policy stance from July 2025 to January 2026 amid stronger-than-expected growth.
  - The S$NEER appreciated by 1.2 percent in 2025, trading in the upper half of the estimated policy band.
  - In April 2026, MAS tightened the monetary policy stance in the face of rising price pressures from the war in the Middle East.
  - Singapore’s financial sector remains resilient; MAS stepped up stress testing and contingency planning.
  - Identified pockets of vulnerabilities: contagion risks due to banks' cross-border and FX exposures; a small number of highly leveraged corporates and households; exposures to commercial real estate; and connections between rapidly evolving NBFIs and banks.
  - FATF published its assessment report for Singapore under the 5th round of mutual evaluations in May 2026; it affirmed a robust framework and process to counter ML, TF and PF, with scope for further enhancing risk mitigation measures in areas such as foreign legal persons, and foreign legal arrangements.
- Policy recommendations and actions
  - MAS should remain vigilant, data dependent, and ready to adjust the pace of easing or tightening as inflation and downside risks evolve.
  - Stand ready to provide liquidity in the market if market stress occurs.
  - Continue to strengthen capacity to monitor and mitigate cybersecurity, AML/CFT, and climate risks.
  - Continue regular industry-wide stress tests (IWST) and engagement with banks and insurers; emphasize NBFI liquidity monitoring and insurer capital and liquidity monitoring.

### Structural Policies
- Findings
  - Authorities’ efforts under the Forward Singapore initiative include longer paid parental leave and enhanced grants for low-income, first-time home buyers.
  - A newly launched temporary financial support scheme for involuntarily unemployed workers strengthens the social safety net.
  - Government progress on helping workers reskill and firms adopt AI technologies to raise potential growth.
  - FY2026 budget emphasizes AI adoption for firms and workers.
  - Recent measures include extending support for mid-career job training and strengthening targeted subsidies for preschool education.
- Policy recommendations
  - Continue policies to promote stronger and more inclusive growth, including reskilling programs and targeted support for vulnerable groups.
  - Support AI adoption while managing labor market transitions with training and social safety net enhancements.

### Annex II — Singapore’s Goods Trade Exposures to the Strait of Hormuz
- Key findings
  - Singapore's aggregate trade exposure to tensions in the Strait of Hormuz: 6.5 percent of gross goods imports and 1.6 percent of goods exports associated with Strait-bordering economies in 2025.
  - Singapore is among the Asia and Pacific region's largest net importers of oil and gas, at just over 7 percent of GDP in 2024.
  - For electricity generation, imported natural gas accounts for over 90 percent of supply; only 26 percent of gas imports were sourced from Strait-bordering economies.
  - Indonesia, Australia, and Malaysia collectively supply over 65 percent of gas imports, providing meaningful scope for substitution.
  - Oil and petroleum products: 39 percent of petroleum oil imports originate from the region, predominantly from the United Arab Emirates.
  - Over 70 percent of the economy's energy consumption is tied to industry; petroleum/petrochemical exposure poses risk to the industrial sector, particularly petrochemicals.
- Implications
  - Headline trade shares understate vulnerabilities in the energy import channel.
  - Disruptions in the Strait could expose power supply and industrial base to meaningful stress, with potential shortages or price spikes in oil products affecting industrial output.

### Annex III — Risk Assessment Matrix (RAM)
- Overview of RAM methodology
  - The RAM shows events that could materially alter the baseline path. The relative likelihood is staff’s subjective assessment (“low” = probability below 10 percent, “medium” = between 10 and 30 percent, “high” = between 30 and 50 percent).
  - Conjunctural shocks and scenarios highlight risks likely over a shorter horizon (12 to 18 months); structural risks remain salient over a longer horizon.
- Selected risks, likelihood, impact, and policy responses
  - Geopolitical tensions and intensification of conflicts
    - Likelihood: High
    - Impact: High — reescalation in the Middle East would push energy prices sharply higher, cause fertilizer and petrochemical shortages, raise food prices and input costs, erode real incomes, slow global and regional demand, and severely hamper Singapore's activity; tighter global financial conditions could test financial stability.
    - Policy response: Provide targeted fiscal support to affected households and businesses; monetary policy focused on preserving price stability, tightening as needed; closely monitor financial sector stability and contingency planning.
  - Protectionism and trade disruptions
    - Likelihood: High
    - Impact: High — Singapore vulnerable as a trade and financial hub; reshoring and less trade reduce external demand and growth; supply-chain shifts could increase near-term price pressures.
    - Policy response: Targeted fiscal support as needed; monetary policy focused on price stability; monitor financial sector and contingency plan; accelerate structural reforms toward a knowledge-based, innovation-driven economy.
  - New trade agreements
    - Likelihood: Low
    - Impact: High — improved trade environment would boost Singapore’s role, supporting external demand and growth.
    - Policy response: Avoid overheating by calibrating monetary policy and unwind prior temporary fiscal support.
  - Disorderly AI correction
    - Likelihood: High
    - Impact: Medium — tech cycle bust can reduce demand and investment in technology-related industries; tighter global financial conditions could test financial stability.
    - Policy response: Monetary policy to preserve price stability; monitor financial sector stability and contingency planning.
  - Cyberthreats
    - Likelihood: High
    - Impact: Low — cyberattacks on critical infrastructure could raise data protection concerns and loss of confidence.
    - Policy response: Assess IT risk management, prepare contingency plans, coordinate with global financial regulators.
  - Climate change
    - Likelihood: Medium
    - Impact: Medium — extreme events could disrupt activity, lower growth, and raise inflationary pressures.
    - Policy response: Enhance climate change adaptation and inter-agency preparedness.
  - AI acceleration
    - Likelihood: Medium
    - Impact: Medium — potential productivity gains but labor market disruptions; requires complementary policies.
    - Policy response: Continue training programs, improve social safety nets for transitions.
  - Disorderly correction in property prices
    - Likelihood: Low
    - Impact: Medium — decline in collateral values could reduce activity and bank lending.
    - Policy response: Adjust macro-prudential policies while safeguarding financial stability; provide targeted assistance to vulnerable households.

### Annex IV — Spillovers from Technology and Oil Shocks
- A. Motivation and Key Findings
  - Semiconductor and tech cycles
    - Manufacturing accounted for about 16.7 percent of Singapore’s nominal GDP in 2023, with semiconductors contributing about 5.0 percent of nominal GDP.
    - Latest available data: manufacturing accounted for about 17.4 percent of Singapore’s nominal GDP in 2025, with semiconductors contributing about 6.0 percent of nominal GDP.
    - Semiconductor sector estimated to account for only about 1 percent of total employment in Singapore.
    - MAS (2023) estimates that every $1,000 decline in final demand in the manufacturing sector would result in a $65 loss in value added in other sectors via the production channel.
    - Prior analysis suggests spillovers from global tech cycles to domestically oriented sectors are limited.
  - Oil shocks and energy dependence
    - Singapore’s reliance on imported energy and large energy-dependent sectors make the country vulnerable to global oil price shocks.
    - Petroleum, petrochemical, and transport-related sectors account for about 8 percent of nominal GDP.
    - These sectors are externally oriented and estimated to account for only about 7 percent of total employment in Singapore; spillovers to domestically oriented sectors likely limited.
    - Oil price shocks operate mainly through inflation, with muted effects on real activity.
  - Overall conclusions
    - Input-output analysis suggests externally oriented sectors (semiconductor, petroleum, petrochemical) are weakly linked to domestic-facing sectors, containing broader spillovers.
    - Global technology-cycle upturns can materially raise GDP, investment, and goods trade, but have limited estimated effects on consumption, inflation, and employment.
    - Continued monitoring warranted on energy-related price pressures, indirect effects on services and administered prices, and interactions between oil prices and inflation expectations.
- B. Input-Output Analysis — Semiconductor sector linkages
  - Findings
    - Semiconductor production has limited backward and forward linkages relative to other sectors (based on Singapore’s 2023 input-output tables).
    - Semiconductor inputs are primarily sourced from within the semiconductor sector itself, accounting for about 72.9 percent of semiconductor industry inputs.
    - Other inputs include head office and business representative office services, wholesale trade, other chemical products, electricity, and general and special-purpose machinery, each accounting for much smaller shares.
    - Semiconductor sector’s direct reliance on energy inputs is small: petroleum about 1.0 percent of inputs, electricity about 1.9 percent, and gas close to zero, implying total energy inputs of about 2.9 percent.
    - While direct energy cost-push effects are limited relative to energy-intensive sectors, electricity remains a critical input, underscoring the importance of continuity of supply.

*Annex I. Staff Policy Advice from the 2025 Article IV Consultation*

### 6. The petroleum refining sector, on the other hand, is a key supplier to downstream

### 6. The petroleum refining sector, on the other hand, is a key supplier to downstream

### Petroleum refining sector: input structure and linkages
- Petroleum products account for about 90.8 percent of total petroleum industry inputs.
- Other inputs—including wholesale trade, land transport, retail trade, and various services—are individually small.
- This points to limited backward linkages with domestic-oriented sectors, even though petroleum products serve as an important upstream input for other parts of the economy.

### Petrochemical sector: domestic embedding and input composition
- Petrochemicals have above-average backward and forward linkages, reflecting their role as an input into downstream manufacturing and industrial activities.
- Petrochemical products account for about 46.4 percent of petrochemical industry inputs.
- Wholesale trade accounts for about 9.0 percent of petrochemical industry inputs.
- Petroleum accounts for about 30 percent of petrochemical industry inputs.
- Despite these linkages, inputs from domestic-oriented sectors are limited, suggesting shocks to the petrochemical sector may have less pervasive effects on domestic-oriented sectors than their centrality in industrial supply chains might imply.

### Empirical approach: shocks and estimation
- Technology-cycle shock measure: first principal component of several global technology-cycle indicators, including semiconductor sales, semiconductor-related equity prices proxied by the Philadelphia Stock Exchange (PHLX) semiconductor index, inventories, and electronics PMIs.
- Expansion and contraction phases identified by the constructed measure broadly coincide with episodes identified in existing work by MAS (2026).
- Oil shock: changes in the oil price are used as the shock variable.
- Estimation method: standard local projection specification, controlling for global and domestic factors:
  - Controls include global demand proxied by U.S. GDP, global financial conditions proxied by the VIX and the U.S. federal funds rate, the SGD/USD exchange rate, and oil prices.
  - Responses are estimated over horizons of up to eight quarters.

### Macroeconomic responses to a positive technology-cycle shock
- A one standard deviation upswing in the technology cycle is estimated to raise GDP by about 1.5–2 percent in levels over the projection horizon.
- Goods exports and imports increase by about 4–6 percent.
- Exports and imports of services do not show comparable increases.
- Gross fixed capital formation increases, reflecting capital-intensive nature of technology-related production and sensitivity of investment to global semiconductor and AI-related demand.
- Private consumption appears largely unaffected.
- Inflation and employment effects are positive but not statistically significant.
- Employment responses in manufacturing, construction, and services are positive in some horizons but not statistically significant.
- Interpretation: limited pass-through to domestic demand and labor market likely reflects the semiconductor sector’s high import intensity, capital intensity, and relatively limited linkages to domestic labor‑intensive sectors.

### Macroeconomic responses to oil-price shocks
- A 1 percent increase in oil prices raises headline and core inflation.
- GDP, consumption, investment, and employment show limited responses.
- Interpretation: consistent with Singapore’s status as a price taker in global energy markets and the role of energy prices in imported inflation and production costs.
- Factors moderating activity effects: diversified economic structure, limited direct energy input share in some high-value sectors such as semiconductors, and offsetting effects (e.g., profit margins in some sectors may increase with higher oil prices).

### Cautions and limitations of empirical results
- The empirical oil shock is based on changes in oil prices and does not separately identify the underlying source of the price movement.
- A supply-driven oil shock (e.g., physical disruptions in the Middle East) could propagate differently from a demand-driven increase in oil prices, especially if it disrupts refining, petrochemical production, shipping, or confidence.
- Local projections provide average historical responses and may not fully capture nonlinearities associated with extreme geopolitical events, severe supply disruptions, or structural shifts.

### Scenario analysis: Severe Conflict (downside)
- Global assumptions:
  - Oil prices increase by 100 percent.
  - Gas prices rise 200 percent.
  - Food commodity prices rise 5–10 percent over 2026–27 relative to their January 2026 pre-war levels.
  - Inflation expectations rise sharply by 100 basis points (bps) in advanced economies.
  - Global growth falls by 1.3 percentage points in 2026.
- Singapore impact:
  - As a highly open economy and net importer of energy, food, and commodities, Singapore faces significant terms-of-trade deterioration.
  - Higher energy costs weigh on industrial production and raise business input costs.
  - Tightening of global financial conditions would dampen investment and consumption.
  - Under the downside scenario, Singapore's output growth could fall to 2.6 percent in 2026 and 1.5 percent in 2027, below potential.
  - Inflation could rise to 3.8 percent in 2026 and 4.3 percent in 2027.

### Scenario analysis: Global Reset (upside)
- Global assumptions:
  - Tariffs imposed since January 2025 are permanently removed, reducing effective US tariff rates by around 10 percentage points, with trading partners reciprocating.
  - China implements a short-term fiscal expansion of 0.5 percent of GDP and productivity-enhancing reforms.
  - Euro area public investment surges, reaching 1 percent of GDP by 2027.
  - U.S. reforms reduce the term premium by 50 basis points.
- Singapore impact:
  - Improvement in global trade sentiment and cross-border investment flows would disproportionately benefit Singapore as a trade and financial hub.
  - External demand would recover more quickly than in the baseline, supporting manufacturing and wholesale trade.
  - Under the upside scenario, Singapore's output would increase by 4.4 percent in 2026 and inflation would reach 2.7 percent in 2026.

### BEPS 2.0 implementation: framework and Singapore’s response
- Pillar One: reallocates taxing rights over a portion of profits of the largest and most profitable MNEs to market jurisdictions; implementation remains uncertain.
- Pillar Two: introduces Global Anti-Base Erosion (GloBE) Rules establishing a 15 percent minimum effective tax rate for large MNEs with consolidated revenues exceeding €750 million.
  - Operates through three consecutive optional rules: source rule (QDMTT), Income Inclusion Rule (IIR), Undertaxed Profits Rule (UTPR).
- January 2026 Side-by-Side Package:
  - Introduced Side-by-Side Safe Harbor (SbS SH) and Ultimate Parent Entity Safe Harbor.
  - United States currently the only jurisdiction listed as having a qualified SbS SH regime.
  - Concept of Qualified Tax Incentives (QTIs) introduced to provide jurisdictions flexibility to introduce Pillar Two‑compliant incentives.
- Singapore legislation:
  - Domestic Top-up Tax (DTT) applies to large MNE groups' profits earned in Singapore when the group's effective tax rate in Singapore falls below 15 percent; designed as a QDMTT.
  - Multinational Enterprise Top-up Tax (MTT) applies to Singapore-parented MNE groups in respect of their low-taxed foreign operations; implements the IIR.
  - Singapore has not implemented the UTPR.
  - Registration with the Inland Revenue Authority of Singapore (IRAS) commenced in May 2026, with the first GloBE Information Returns due by March 2027.
- Refundable Investment Credit (RIC) scheme:
  - Targeted tax credit with a refundable cash feature designed to be consistent with GloBE rules for Qualified Refundable Tax Credits.
  - Administered by the Economic Development Board and Enterprise Singapore.
  - Supports high-value and substantive economic activities such as new manufacturing capacity, production of low-carbon energy, and significant capital investments.
  - Companies can receive support of up to 50 percent on qualifying expenditure categories, with awards spanning qualifying periods of up to 10 years.
  - Unutilized credits exceeding tax liabilities are refunded in cash within four years.
  - RIC represents a strategic pivot from traditional tax rate competition to substance-based incentives compatible with the international framework.

### Fiscal implications of BEPS 2.0 for Singapore
- Near term:
  - DTT expected to lead to higher corporate tax collections starting in FY2027 as large MNEs adjust to the 15 percent minimum rate.
  - Staff estimates that additional tax collections could amount to about 0.6 percent of GDP in FY2027.
  - The Side-by-Side arrangement’s impact on Singapore is limited but notable: U.S.-parented MNEs will be exempted from IIR and UTPR but remain fully subject to Singapore's DTT on profits earned locally.
- Medium term:
  - Pillar Two reduces traditional tax competition on rates but intensifies competition through other fiscal tools and incentives.
  - Elevated expenditure pressures, particularly in the Ministry of Trade and Industry's budget, which has risen sharply and is expected to remain elevated to support investment promotion.
  - Sustainability of this position depends on maintaining Singapore's attractiveness for substantive economic activities and the effectiveness of the RIC and other non-rate incentives versus competing subsidy programs.
  - Policymakers will need to remain agile to respond to further changes in the global tax landscape.

### Sovereign risk and debt sustainability summary
- Singapore’s debt-to-GDP is about 166 percent of GDP at end‑FY2025, but large public financial assets result in a positive net asset position.
- Public debt is primarily issued for non-spending purposes (e.g., 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)).
- As of end-FY2025, only about 1 percent of public debt comprised debt issued for spending purposes under SINGA.
- RMGS holdings: MAS’s outstanding holdings amounted to S$237.1 billion at end‑FY2025.
- Overall DSA assessment:
  - The overall risk of sovereign stress is low.
  - Long-term risks are low.
  - Medium-term risks are assessed as low, against a mechanical signal of moderate, based on authorities' strong compliance with their balanced budget rule and other mitigating factors (all debt held domestically and issued in local currency).
  - Singapore is a low scrutiny country in the debt sustainability analysis framework for market access countries.

*Source: IMF staff compilation from the Singapore country chapter.*

### Annex VII. Table 2. Singapore: Debt Coverage and Disclosures

### 1sgpea2026001 - Annex VII. Table 2. Singapore: Debt Coverage and Disclosures

### Debt coverage and subsectors
- Chosen coverage in the DSA: central government (CG).
- 1a. If central government, are non-central government entities insignificant? No
- Subsectors captured in the baseline:
  - 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

### Consolidation and recording notes
- Debt consolidation across sectors: all subsectors listed show zeros in the holder/issuer consolidation table (eight entries of 0).
- Commentary: "Consistent with the data on government debt reported by the authorities, the fiscal assumptions in this DSA are based on the central government debt."
- Basis of recording and valuation of debt stock: fields indicated but recorded as "Not applicable" or with checkboxes for recording conventions (market value 7/, nominal value 5/, face value 6/), and references to cash/non-cash basis and consolidation status as annotated in the table.
- Reporting on intra-government debt holdings: table includes entries and labels for CPS, NFPS, GG: expected, CG, non-consolidated, etc.
- Definitions and notes provided in footnotes:
  - 1/ CG=Central government; GG=General government; NFPS=Nonfinancial public sector; PS=Public sector.
  - 2/ Stock of arrears could be used as a proxy in the absence of accrual data on other accounts payable.
  - 3/ IPSGSs = Insurance, Pension, and Standardized Guarantee Schemes, typically including government employee pension liabilities.
  - 4/ Includes accrual recording, commitment basis, due for payment, etc.
  - 5/ Nominal value definition described.
  - 6/ Face value definition described.
  - 7/ Market value definition described; only traded debt securities have observed market values.

### Key statistics and structural notes (from annex tables)
- NFPS label present in table headers.
- The annex table content is aligned with the authorities’ reported government debt and central government focus.

*Source: 1sgpea2026001 - Annex VII. Table 2. Singapore: Debt Coverage and Disclosures*

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### External Sector Assessment (Annex VIII)

### Overall assessment and policy implications
- Overall Assessment: "The external position in 2025 was substantially stronger than the level implied by medium-term fundamentals and desirable policies."
- Assessment is subject to a wide range of uncertainty due to Singapore’s very open economy and status as a global trading and financial center.
- Medium- and long-term projection: CA surplus projected to narrow gradually alongside higher public spending, stronger social safety nets, and an increase in household consumption as the share of the prime working age population actively saving for retirement declines.
- Potential Policy Responses:
  - Higher public investment on health care, green and other physical infrastructure, and human capital.
  - Ongoing reforms to strengthen social safety nets.
  - Policies to promote transparent, predictable and mutually beneficial trade policy frameworks.

### Foreign asset and liability position and trajectory
- Background:
  - NIIP stood at 179.1 percent of GDP in 2025, up from 166.0 percent of GDP in 2024 but below the average level of 219.6 percent of GDP in 2019–2024.
  - Gross assets and liabilities are high; over half of foreign liabilities are in FDI (54.7 percent) and about a fifth are in the form of currency and deposits.
  - Valuation effects accounted for 4.9 percentage points of the change in NIIP in 2025.
  - The large positive NIIP partly reflects private savings accumulated in foreign assets for old-age consumption, expected to be gradually unwound over the long term.
- Assessment:
  - Large gross non-FDI liabilities (434.8 percent of GDP in 2025) — predominantly cross-border deposit taking by foreign bank branches — present some liquidity risks, but are mitigated by:
    - Large gross asset positions.
    - Banks’ large short-term external assets.
    - Authorities’ close monitoring of banks’ liquidity risk profiles.
  - Singapore has large official reserves and other official liquid assets.
- 2025 (% GDP) key figures:
  - NIIP: 179.1
  - Gross Assets: 1138.8
  - Res. Assets: 67.9
  - Gross Liab.: 959.6
  - Debt Liab.: 323.2

### Current account (CA)
- Background:
  - CA surplus was 16.7 percent of GDP in 2025, down from 17.2 percent in 2024.
  - CA balance is below the average of 17.6 percent over 2015–24 and lower than the post-global-financial-crisis peak of 22.9 percent in 2010.
  - Drivers: significant private sector saving surpluses; in 2025 strong goods balance, smaller services surplus partly offset by an income account deficit.
  - Mandatory defined-contribution pension program assets were about 83.8 percent of GDP in 2025.
  - In 2025, public saving increased due to a higher fiscal surplus and private saving fell, resulting in a small increase in gross national savings of 0.1 percent of GDP.
- Assessment:
  - Using the EBA framework, staff assesses the 2025 CA gap to be in the range of 5.6–9.6 percent of GDP, with a midpoint of 7.6 percent.
  - The identified policy gap of 2.0 percent of GDP in 2025 reflects a more contractionary fiscal policy adopted in Singapore compared to the rest of the world.
  - Measurement issues and structural factors contributing to the CA gap residual:
    - Pension system accounts for about 1.6 percent of GDP of the residual.
    - Inflation bias in NFA measurement could overstate the measured CA balance by about 1.5–5 percent of GDP.
    - Excluding retained earnings on portfolio equity could understate it by about 3 percent of GDP.
    - Other factors: compressed labor share, role as a financial center, rapid aging.
- 2025 (% GDP) CA figures:
  - CA: 16.7
  - Cycl. Adj. CA: 17.0
  - Staff Gap (midpoint): 7.6

### Real exchange rate (REER)
- Background:
  - Singaporean dollar appreciated notably since 2020.
  - REER appreciated by 0.6 percent in 2025, reflecting disinflation in Singapore relative to trading partners that offset appreciation of the NEER by 1.3 percent.
  - Between 2020 and 2024 cumulative: REER appreciated by 16.8 percent and NEER appreciated by 12.1 percent.
  - As of March 2026, the REER has appreciated by 1.1 percent relative to its 2025 average.
- Assessment:
  - Staff assesses the REER to be undervalued in the range of 11.2 to 19.2 percent, with a midpoint of 15.2 percent in 2025 (applying an estimated elasticity of 0.5).

### Capital and financial accounts; FX intervention and reserves
- Capital and financial accounts:
  - Background: open capital account; status as trade and financial center implies sensitivity to market sentiment; financial account reflects reinvestment abroad of income from official foreign assets, sizable net inward FDI, and smaller but more volatile net bank-related flows.
  - In 2025, capital and financial account featured lower outflows of 12.2 percent of GDP (outflows averaged 15.9 percent over 2021–24).
  - Assessment: financial account likely to remain in deficit as long as CA surplus remains large.
- FX intervention and reserves:
  - With NEER as intermediate monetary policy target, intervention is undertaken to achieve inflation and output objectives; net FX purchases are endogenous to monetary policy framework.
  - Aggregate data on FX intervention operations published since April 2020 (with a 6-month lag).
  - 2025H1 net FX purchases: US$14 billion; 2024H1: US$25.1 billion; 2024H2: US$3.7 billion.
  - Official reserves held by MAS: US$409 billion (68 percent of GDP) in 2025.
  - Assessment: current level of official external assets appears adequate; no clear case for further accumulation for precautionary purposes.
  - Additional official foreign assets managed by Temasek and GIC noted; Temasek external assets amounted to 53.7 percent of GDP in 2025.
- Supplementary note: Singapore has a negative income balance despite a large positive NIIP position due to lower rates of return on foreign assets relative to returns on foreign liabilities and the presence of foreign-owned multinationals that accounted for 31 percent of GDP in 2020.

*Source: 1sgpea2026001 - Annex VII. Table 2. Singapore: Debt Coverage and Disclosures*

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### Status of Main Recommendations of the 2019 FSSA (Annex IX)

- Recommendation 1: "The MAS should strengthen U.S. dollar liquidity among D-SIBs."
  - Time: MT
  - Authorities’ Status Update (as of May 2026): Completed.
  - Key actions and outcomes:
    - MAS engaged banks to strengthen foreign currency liquidity management; two reviews in 2023 on liquidity stress test practices and contingency funding plans.
    - Issued bank-specific recommendations: (i) stress test limits and triggers for significant foreign currencies such as USD; (ii) review methodologies to assess FX swap capacities under stress; (iii) clarity of USD funding options under stress.
    - From 2018 to March 2025, proportion of more stable USD funding sources (non-bank deposits and debt issuance) has increased and constitutes the bulk of USD funding.
    - MAS’ Industry-wide Stress Test 2024 assessed D-SIBs’ daily cashflow positions under severe liquidity stresses, showing sufficient buffers and funding options.
    - MAS will continue monitoring USD funding profile through engagements and USD liquidity indicators.

- 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
  - Authorities’ Status Update (as of May 2026): Completed.
  - Key actions:
    - MAS established a new Resolution Office (RSO) in October 2023 with staff fully dedicated to resolution work.
    - RSO to steer efforts to put in place an effective resolution regime, develop and enhance MAS’ resolution toolkit, and build capabilities.

- Recommendation 3: "Expand the scope of bail-in to include senior unsecured debt securities."
  - Time: MT
  - Authorities’ Status Update (as of May 2026): Ongoing.
  - Key points:
    - Authorities balance broader bail-in scope against contagion risks and household balance-sheet impact.
    - Preference for narrower scope given bail-in is relatively untested; consideration will be given to inclusion of senior unsecured debt securities with contractual bail-in clauses as TLAC.

- Recommendation 4: "Continue to develop guidelines and playbooks for the new resolution tools. Staff should be trained, and processes tested."
  - Time: I
  - Authorities’ Status Update (as of May 2026): Completed.
  - Key actions and examples:
    - Tabletop walkthrough of resolution of a foreign bank branch where home authority takes a Single Point of Entry (SPE) approach; used to validate policy considerations and train staff.
    - Updates to the "Handbook on Management of Distressed Banks" to incorporate operational procedures and legislative amendments.
    - Ongoing work to further update the "Handbook" and "Guidance on Resolution Tools" in areas including:
      - valuation and use of independent valuers in resolution;
      - resolution fund trustee and bridge entity considerations;
      - bail-in execution mechanics based on FSB practices paper;
      - operational procedures for the Intervention Team’s (I-Team) functional area plans.

*Source: 1sgpea2026001 - Annex VII. Table 2. Singapore: Debt Coverage and Disclosures*

### 5. The MAS should

### 5. The MAS should

### Outsourcing: pre-notification of material arrangements
- Recommendation: formalize and clarify that MAS may require pre-notification of material outsourcing arrangements where MAS is not satisfied that a bank has managed its outsourcing risk adequately.
- Timeframe: MT
- Status: Completed.
- Authorities’ action:
  - MAS issued the revised Outsourcing Guidelines (for banks and merchant banks) (“Guidelines”) 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.

### Payments systems oversight: resourcing
- Recommendation: Devote more resources to the oversight and supervision of the payments systems.
- Timeframe: NT
- Status: Completed.
- Authorities’ action:
  - From 2019, MAS allocated an additional 40 percent of dedicated resources to the oversight and supervision of payment systems.
  - The Payments and Infrastructure Division expanded to become the Payments Department in 2020, in charge of supervising both payment services and payment systems.

### Cyber resiliency of the central bank and MEPS+
- Recommendation: Enhance cyber resiliency by (i) clarifying the role of Chief Cyber Security Officer; and (ii) continuing to strengthen cybersecurity resiliency.
- Timeframe: I (Immediate)
- Status: (i) Completed; (ii) Completed.
- Authorities’ action (i):
  - 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 & 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.
- Authorities’ action (ii):
  - MAS has completed various cybersecurity initiatives such as Netflow, Database Activity Monitoring and User Behavioral Analytics to enhance the protection of MAS’ critical systems.
  - MAS has embarked on a cybersecurity transformation roadmap to strengthen cybersecurity resiliency on an ongoing basis, including implementing new measures (e.g., Data Loss Prevention) and enhancing existing security tools.

### Cyber network map for cyber risk surveillance
- Recommendation: 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.
- Timeframe: MT
- Status: Completed.
- Authorities’ action and features of the cyber map:
  - 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:
    - 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.
  - Uses of the map:
    - Identify key nodes based on the network map to inform and prioritize cyber risk surveillance efforts;
    - Engage FIs on outsourcing, third-party and supply chain risk management practices for key service providers identified through the cyber map; and
    - Reach out to fellow regulators on means to engage key service providers that are common to many FIs globally.
  - Example engagement:
    - 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.

*Source: IMF staff and the authorities’ self-assessment (as of May 2026).*

### 3.3 The current macroprudential policy  stance is moderately  restrictive, which has helped

### 3.3 The current macroprudential policy  stance is moderately  restrictive, which has helped

### Housing market and macroprudential stance
- The current macroprudential policy stance is described as "moderately restrictive."
- Effect: has helped the housing market to come into better demand-supply balance.
- Assessment: Private residential prices are broadly aligned with fundamentals.
- Risk note: underlying demand remains resilient and market conditions bear continued monitoring.
- Conclusion: Against this backdrop, the current macroprudential settings are appropriate and effective in preserving sustainable conditions in the housing market.

### Financial sector resilience
- Domestic financial system: resilient.
- Banks in Singapore:
  - Well-capitalized with healthy liquidity positions.
  - Underpinned by a stable and diversified funding base.
  - Maintain ample capital buffers and provisioning coverage to absorb major shocks, including elevated oil prices and a broader economic downturn.
  - Asset quality risks contained; recent MAS stress tests show the domestic corporate sector would remain broadly resilient even with increased debt servicing and cashflow stresses related to the Middle East conflict.
- Non-bank financial institutions (NBFIs): well-positioned to withstand unanticipated shocks and not expected to pose systemic risks.
- Investment funds: able to meet redemptions in an orderly fashion amid trade tensions and the Middle East conflict.

### Digital assets and AML/CFT
- MAS approach: retain focus on fostering an innovative and responsible digital asset ecosystem while strengthening regulatory measures for digital payment token services.
- Regulatory focus: adopted a risk-centric approach emphasizing key risks including money laundering, terrorism financing and proliferation financing.
- International assessment: The 2026 Financial Action Taskforce (FATF) report on Singapore affirmed that Singapore’s AML/CFT framework and capabilities are effective and robust.
- Follow-up: MAS will continue to follow up on areas for improvement highlighted by the FATF mutual evaluation process.

### Labor, skills, and inclusivity policies (medium term)
- Active labor market policies aim to reduce wage disparity and support upskilling and reskilling.
- Workfare Skills Support (WSS) scheme: hourly training allowances for lower wage workers under the basic tier have been increased.
- Progressive Wage Credit Scheme (PWCS): co-funding levels for wage increases have been increased, and the minimum wage increase that qualifies for government co-funding has been raised.
- SkillsFuture Level-Up Programme: provides monthly training allowances for all Singaporeans aged 40 and above and will be extended to those who take up part-time training courses.
- Net effect: greater support for individuals seeking training and upgrading opportunities throughout key stages of working life.

### Enterprise ecosystem and innovation support
- Enhanced grants and tax support to assist firms to internationalize and deepen activities in existing overseas markets.
- Startup SG Equity scheme: government will provide initial capital to catalyze and crowd in private funding for early-stage and growth-stage companies.
- Programs expanded to attract high quality listings and promote increased investor participation in the domestic stock market.
- Research, Innovation and Enterprise support: government committed S$37 billion for its five-year Research, Innovation and Enterprise (RIE) 2030 plan to strengthen research capabilities, drive impactful innovation and grow a vibrant talent ecosystem.

### AI strategy and workforce adaptation
- Second National AI Strategy (NAIS 2.0): encourages businesses and workers to leverage AI to create an ecosystem that harnesses AI benefits and keeps Singapore competitive.
- Governance: a new National AI Council, chaired by the Prime Minister, established to drive Singapore’s AI agenda.
- Support measures: tailored support for firms to use AI to transform businesses; enhancement of existing grant and tax schemes to incentivize AI adoption.
- Education and training: strengthen AI literacy for students across all Institutes of Higher Learning and make mid-career AI learning pathways clearer and easier to access to help workers build practical AI capabilities.

### Fiscal pressures and demographic challenges
- Government expects spending to increase significantly in the future for healthcare, climate change, and clean energy transition.
- Social spending is rising to support lower-income Singaporeans at various life stages including retirement and job transitions.
- Structural constraints: lack of natural resources and hinterland necessitates a fiscal system sustainable over the long run.
- Pension system: funding for future retirement expenditure secured through a defined contribution pension system which accounts for the presently high level of private saving.
- External buffer: government has needed to accumulate net foreign assets as a buffer for crisis times.

### External balances and exchange rate developments
- Structural features: Singapore’s external balances reflect being a small, trade-oriented economy and a major intermediary for international commerce; activities of global corporations significantly shape goods and services trade.
- Exchange rate: The Singapore Dollar Real Effective Exchange Rate (S$REER) has appreciated by around 14% since October 2021, the start of MAS’ last monetary policy tightening cycle.
- Fiscal approach: government continues substantial investment in infrastructure, housing, healthcare, education, and climate adaptation while maintaining fiscal discipline and maximizing outcomes relative to resources deployed.
- Health outcomes: Singapore has relatively good health outcomes reflected in high expected healthspan (and lifespan) while maintaining one of the lowest healthcare expenditure levels among developed economies even with rapid population aging.

### Medium-term current account and savings outlook
- Over the medium term, Singapore’s current account surplus is expected to moderate as household saving declines with a more aged population and a significant increase in the share of Singaporeans above the retirement age over the next decade.
- Public sector savings are expected to ease as growth slows and spending pressures rise with an older population.

### External Balance Assessment (EBA) reservations
- Authorities’ reservations: the EBA estimation is unable to account for the range of characteristics of economies, including small open economies that play important trade and financial intermediary roles.
- Concerns:
  - EBA assessment for Singapore appears materially shaped by out-of-model adjustments that are not straightforwardly applicable symmetrically across countries.
  - Healthcare expenditure adjustor: appears to unilaterally penalize Singapore’s efficiency in healthcare provision despite strong outcomes.
  - NFA adjustor: does not adequately account for Singapore’s role as a global business and investment hub and financial center, nor the government’s need to hold a diversified portfolio of safe assets abroad.
  - No adjustment made for Singapore’s defined contribution pension scheme (Central Provident Fund (CPF)), which IMF staff have found to account for a notable share of Singapore's current account gap.
- Implication: these considerations imply a large confidence interval around Singapore’s current account and REER gaps as also noted in the Staff Report.

### Final policy stance
- Authorities will remain vigilant to global and domestic developments and assess potential impacts on macroeconomic and financial stability.
- Readiness: authorities stand ready to undertake appropriate policy responses where needed.
- Commitment: continued commitment to longer-term domestic restructuring to embrace new economic opportunities and promote inclusive and sustainable growth.
- Fiscal emphasis: maintain a sound fiscal position to continue long-term investment while balancing social support, fiscal sustainability, and building a hopeful future.

*Source: IMF staff report chapter excerpt*

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_Source: https://www.imf.org/-/media/files/publications/cr/2026/english/1sgpea2026001.pdf_