IMF Executive Board Concludes 2021 Article IV Consultation with Singapore
IMF News, July 16, 2021
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- Published: July 16, 2021
Recent economic developments and policy response
- Singapore entered the COVID-19 pandemic with sizable policy space and robust economic policy frameworks that enabled a coordinated, comprehensive, and sizable policy response, with fiscal policy acting as a first line of defense.
- Real GDP contracted by 5.4 percent in 2020 and registered 1.3 percent year-on-year growth in 2021Q1, led by a strong manufacturing sector performance.
- Unemployment declined to 2.9 percent in April 2021 from its peak of 3.5 percent in September 2020.
- Inflation, which had turned negative in 2020, registered 2.1 percent year-on-year in April 2021.
- Policy support helped banks maintain strong liquidity and capital buffers.
- The current account surplus was resilient through the crisis and registered 17.6 percent of GDP in 2020.
Outlook and projections
- Activity is expected to accelerate in 2021H2 as vaccines become more widely available, bringing annual growth to 6 percent in 2021.
- The recovery is expected to be led by manufacturing and modern services, while hard-hit sectors such as aviation and tourism related industries improve more gradually.
- Inflation is expected to be contained given remaining slack in the labor market.
- With the recovery in domestic demand, the current account surplus is expected to decline to 15.5 percent of GDP in 2021.
- Over the medium term:
- Growth should converge to 2.5 percent.
- The current account surplus is expected to decline.
- MAS core inflation is expected to stabilize at 2 percent.
- The outlook is subject to unusually high uncertainty, with balanced risks stemming mostly in the near term from the unknown trajectory of the pandemic globally and locally, as well as the path for vaccines. Additional risks include volatile global financial conditions, threats to globalization and trade, and the uncertain impact of the pandemic on the corporate sector.
Executive Board assessment and guidance
- Directors welcomed the large and comprehensive policy response to the pandemic and ensuing economic crisis.
- Directors agreed that macroeconomic policies should remain supportive in the near term while efforts should continue to facilitate a transition toward a greener, smarter, and more inclusive economy over time.
- Fiscal policy:
- Directors generally agreed that the fiscal response in 2021, with more targeted support, is in line with the recovering economy.
- Should downside risks materialize, Directors recommended using the ample fiscal space as the first line of defense to prevent a set-back in the recovery.
- Directors acknowledged that the authorities’ plan to borrow for major infrastructure projects would generate benefits across several generations.
- Directors encouraged the authorities to quantify the costs of addressing challenges such as population aging, climate change, digitalization, and future pandemics, with a view to guiding future plans for revenue mobilization.
- External position and rebalancing:
- Directors noted that Singapore’s external position remained substantially stronger than warranted by fundamentals in 2020, with some caution advised in interpreting the external sector assessment given pandemic uncertainty.
- They considered that higher government spending to address long-term challenges, along with the expected drawdown of household savings, should contribute to external rebalancing over time.
- Monetary policy and financial sector:
- Directors supported maintaining the accommodative, data-dependent monetary policy stance until the recovery is fully entrenched.
- They welcomed the monetary authority’s liquidity and credit support measures, which have ensured proper market functioning.
- Given pockets of risks remaining in the financial sector, Directors recommended continued supervisory vigilance, including close monitoring of nonperforming loans in real estate markets and banks’ foreign currency risk.
- They encouraged the authorities to continue to strengthen US dollar liquidity among domestic systemically important banks (D-SIBs).
- Governance and regulatory frameworks:
- Directors looked forward to further progress in enhancing the effectiveness of the AML/CFT framework and in implementing the 2019 FSSA recommendations.
- Structural and transition policies:
- Directors welcomed ongoing initiatives to facilitate economic transition post‑pandemic.
- They noted that the authorities’ focus on labor reskilling and training would help facilitate resource reallocation to high-growth sectors.
- Plans to accelerate digitalization, innovation, and climate-resilient infrastructure investment should help sustain medium-term economic growth.
Key statistics and selected indicators (2015–22 table highlights)
- Nominal GDP (2020): US$340 billion
- Population (2020): 5.69 million
- GDP per capita (2020): US$59,819
- Main goods exports (2020, percent of total non-oil goods exports):
- machinery & transport equip. (59.8 percent)
- chemical products (15.8 percent)
- misc. manufactured articles (10.6 percent)
- Top three destinations for goods exports (2020, percent of gross goods exports):
- China (13.7 percent)
- Hong Kong SAR (12.4 percent)
- USA (10.5 percent)
- Selected growth and macro indicators:
- Real GDP growth by year: 2015: 3.0; 2016: 3.3; 2017: 4.5; 2018: 3.5; 2019: 1.3; 2020: -5.4; 2021 (proj): 6.0; 2022 (proj): 3.1
- Total domestic demand (2015–2021 figures include): 2015: 0.4; 2016: 5.5; 2017: 1.2; 2018: 1.7; 2019: -10.7; 2020: 5.3
- Gross national saving (percent of GDP): 2015: 44.0; 2016: 44.6; 2017: 40.4; 2018: 38.9; 2019: 40.2; 2020: 39.1; 2021 (proj): 38.7
- Gross domestic investment (percent of GDP): 2015: 25.4; 2016: 26.5; 2017: 27.3; 2018: 25.0; 2019: 24.7; 2020: 22.6; 2021 (proj): 23.5; 2022 (proj): 23.8
- CPI inflation (period average): 2019: 0.6; 2020: -0.2; 2021 (proj): 1.4
- MAS core inflation (2021 projection): 1.5; MAS core inflation stabilizing at 2 percent over medium term
- Unemployment rate (period averages): 2015: 1.9; 2016: 2.1; 2017: 2.2; 2018: 2.7
- Central government finances (percent of GDP):
- Revenue: 2015: 17.3; 2016: 18.5; 2017: 18.9; 2018: 17.9; 2019: 17.7; 2020: 18.7; 2021 (proj): 18.6
- Expenditure: 2015: 14.0; 2016: 15.0; 2017: 13.8; 2018: 14.1; 2019: 23.4; 2020: 21.1; 2021 (proj): 17.2
- Net lending/borrowing: 2015: 4.9; 2016: 4.1; 2017: -5.7; 2018: -2.4
- Balance of payments and reserves:
- Current account balance (US$ billions): 2015: 57.6; 2016: 56.0; 2017: 59.3; 2018: 57.9; 2019: 53.4; 2020: 59.8; 2021 (proj): 59.1
- Current account (percent of GDP): 2020: 17.6; 2021 (proj): 15.5
- Exports, f.o.b. (US$ billions): 2015: 396.2; 2016: 373.2; 2017: 416.4; 2018: 458.9; 2019: 441.3; 2020: 411.6; 2021 (proj): 465.7; 2022 (proj): 488.3
- Imports, f.o.b. (US$ billions): 2015: -303.7; 2016: -283.2; 2017: -315.4; 2018: -357.4; 2019: -344.5; 2020: -318.0; 2021 (proj): -362.4; 2022 (proj): -380.1
- Gross official reserves (US$ billions): 2015: 247.7; 2016: 246.6; 2017: 279.9; 2018: 287.7; 2019: 279.5; 2020: 362.3; 2021 (proj): 390.8; 2022 (proj): 407.5
- Gross official reserves (In months of imports): 2015: 6.7; 2016: 6.2; 2017: 6.8; 2018: 7.8; 2019: 7.9; 2020: 8.0
- Memorandum items:
- Nominal GDP (in billions of Singapore Dollars): 2015: 423.4; 2016: 440.4; 2017: 474.1; 2018: 507.1; 2019: 510.7; 2020: 469.1; 2021 (proj): 502.1; 2022 (proj): 524.7
- Growth (percent): 2019: 6.1; 2020: 7.7; 2021 (proj): -8.2
Press Release No. 21/219, IMF Communications Department, July 16, 2021
