IMF Staff Completes 2019 Article IV Mission to Singapore

IMF News, May 14, 2019

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IMF team led by Nada Choueiri visited Singapore from May 2 to May 14 for the 2019 Article IV Consultation.
End-of-mission statement conveys preliminary findings; views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
Press Release No. 19/165 (May 14, 2019).

Singapore’s economic growth moderated to 3.2 percent in 2018.
Advanced estimates for Q1 2019 show growth of 1.3 percent compared to the corresponding period of 2018.
Growth is expected to slow to 2.3 percent in 2019.
Domestic investment declined in 2018 after a surge in 2017; investment is expected to pick up with economy-wide push for digitalization and new industry-related project plans.

IMF team projects MAS core inflation to slightly edge down to 1.5 percent in 2019 reflecting lower electricity prices from retail electricity market liberalization and lower global oil prices.
Headline inflation is expected to rise to 1 percent as the drag from accommodation and private road transport costs recede.
Overall inflationary pressures remained modest in 2018.

In its April 2019 monetary policy meeting, MAS kept unchanged the rate of appreciation of the S$NEER policy band, with no change to its width and the level at which it is centered.
IMF team concurs with MAS’s decision to keep monetary policy on hold.
Recommendation: monetary policy should continue to be data dependent going forward.
MAS announced a decision to release data on net purchases of foreign exchange; IMF team welcomes this announcement as enhancing transparency without compromising operational effectiveness.

In the FY2019/20 budget, the overall surplus excluding land sales is expected to reach 0.5 percent of GDP (IMF’s estimates).
Budget measures:
- Directed at businesses, particularly SMEs, to foster investment, use of technology, and innovation.
- Support inclusiveness through the Bicentennial Bonus, expansion of healthcare schemes, and measures to encourage employment of older workers.
Recommendation: authorities should remain ready to provide fiscal stimulus as a first line of defense if downside risks materialize.

Singapore is a large financial center with a strong regulatory and supervisory framework.
The 2019 Financial Sector Assessment Program (FSAP) found the banking sector’s health remains strong, backed by high capital, liquidity, profitability and overall strong asset quality.

IMF team supports authorities’ efforts to promote a more innovation-based growth model.
Policy measures noted:
- Targeted incentives for firms to automate, internationalize, and raise productivity.
- Lifelong learning and retraining to help workers upgrade skills.
- MAS promoting Fintech ecosystem development while safeguarding financial stability.
- Social policies aimed at making growth more inclusive and tackling rapid population aging.
These policies are intended to facilitate structural transition by mitigating disruption from technology and aging.

Risks to the outlook are tilted to the downside and mainly stem from external sources.
Key external risks identified:
- Tightening of global financial conditions.
- Escalation of sustained trade tensions.
- Sharper-than-expected deceleration of global growth.
Singapore’s status as a financial and trading hub increases exposure to these external risks.

The IMF team expressed gratitude to the authorities for their openness, cooperation, and hospitality.

Source: Press Release No. 19/165, May 14, 2019.