IMF Executive Board Concludes 2023 Article IV Consultation with Singapore
August 29, 2023
Washington, DC : The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Singapore.
Singapore’s post-pandemic recovery is nearly complete. Strong economic fundamentals and the authorities’ decisive policy responses, including an unprecedented policy stimulus, supported a rapid recovery from the COVID-19 shock. Following a sharp rebound of 8.9 percent in 2021, real GDP growth moderated to 3.6 percent in 2022, and weakened further to 0.4 percent (year on year) in 2023Q1, reflecting weaker global demand. Despite the solid post-pandemic recovery, consumer-facing services (except the retail sector) and construction, the hardest hit sectors during pandemic, remained below pre-pandemic levels. Inflation remained elevated and broad-based at about 5.7 percent in April 2023, despite recent signs of moderation. Inflation expectations, however, remain well-anchored.
Macro policies are appropriately tight to moderate price pressures in 2023. The Monetary Authority of Singapore (MAS) tightened monetary policy under its unique framework five consecutive times since October 2021, and has paused so far in 2023, given negative imported inflation and projected below-trend growth this year. The 2023 budget is appropriately tight with a surplus of 0.7 percent of GDP and combined with targeted support to mitigate the short-term impact of high inflation and the Goods and Services Tax (GST) rate increase for the most vulnerable.
Lower growth and elevated inflation define the near-term outlook. Growth is projected to moderate to 1.0 percent in 2023, reflecting largely weakening external demand. Inflation is projected to subside but remain elevated at 5.5 percent in 2023 reflecting some inflation persistence, the one-off effect of the GST rate hike, and continued relatively tight labor market. Over the medium term, the current account surplus is expected to decrease gradually as consumption and capital-related imports recover, notwithstanding a gradual pick up in foreign tourism flows post-pandemic.
Executive Board Assessment[2]
Executive Directors commended the authorities for the impressive post-pandemic recovery underpinned by strong fundamentals and a sound policy response. Directors noted, however, that Singapore’s growth momentum is weakening and the outlook is subject to downside risks arising mainly from worsening external conditions, including a slowdown in trading partners, and tightening global financial conditions. Inflation remains elevated, albeit moderating. In this context, Directors considered that near-term macroeconomic policies should focus on managing price pressures, while nurturing growth.
Directors broadly agreed that fiscal policy in 2023 is appropriately constrained while allowing for temporary and targeted support to the most vulnerable impacted by the high cost of living. It was also noted that, given the softening in private consumption and large external surpluses, there is some scope for flexibility to help boost domestic demand. Should downside risks materialize, Directors agreed that fiscal policy should be the first line of defense.
Directors noted that Singapore’s external position remained substantially stronger in 2022 than warranted by fundamentals and desired policies, while acknowledging the uncertainties around the external sector assessment (ESA) estimates. They concurred that Singapore is well-positioned to increase spending to address medium- and long-term challenges, which will also help reduce the large external surpluses. Higher public investment will lower net public saving, while an expansion of social services in areas such as healthcare and unemployment support would help reduce households’ precautionary savings and support stronger consumption.
Directors supported the authorities’ tight monetary policy stance and concurred that monetary policy should maintain its tightening bias and continue to focus on reining in inflation. Further timely and data-dependent tightening may be needed if persistent inflation risks damaging the basis for sustained growth.
Directors agreed that the financial sector remains sound and welcomed the authorities’ commitment to safeguard its stability. They encouraged the authorities to continue monitoring highly leveraged corporates, particularly SMEs, and households, as well as liquidity positions in banks and non-bank financial institutions. Directors considered that the tight macroprudential stance should generally be maintained and further tightened as needed to prevent a rise of systemic financial risks, including in the residential housing market. They took positive note of the progress made in implementing the 2019 FSSA recommendations and encouraged continued enhancement of the AML/CFT framework.
Directors welcomed the authorities’ longer-term policy commitments to accelerate Singapore’s economic transformation toward a green, digital, and more inclusive economy, as illustrated by steps already taken in the FY2023 budget. In particular, they underscored the importance of climate-related measures and active labor market policies to prepare the country for sustained, resilient growth.
[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .
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Singapore: Selected Economic and Financial Indicators, 2017–24 |
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Nominal GDP (2022): US$466.7 billion |
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Population (2022): 5.6 million |
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GDP per capita (2022): US$82,794 |
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Main goods exports (2022, percent of total non-oil goods exports): machinery & transport equip. (63.1 percent); chemical products (14.4 percent); and misc. manufactured articles (9.8 percent). |
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Top three destinations for goods exports (2022, percent of gross goods exports): China (12.4 percent); Hong Kong SAR (11.2 percent); and Malaysia (10.0 percent). |
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Projection |
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2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
2024 |
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Growth (percentage change) |
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Real GDP |
4.5 |
3.6 |
1.3 |
-3.9 |
8.9 |
3.6 |
1.0 |
2.1 |
|
Total domestic demand 1/ |
5.9 |
1.1 |
2.0 |
-9.8 |
9.5 |
4.4 |
2.2 |
2.7 |
|
Final domestic demand 1/ |
3.9 |
0.7 |
2.7 |
-10.0 |
9.8 |
4.8 |
2.2 |
2.7 |
|
Consumption |
3.2 |
3.9 |
2.9 |
-7.5 |
5.8 |
6.6 |
1.7 |
2.7 |
|
Private consumption |
3.1 |
4.1 |
2.8 |
-13.1 |
6.6 |
9.7 |
2.1 |
1.8 |
|
Gross capital formation 1/ |
10.8 |
-3.6 |
0.4 |
-14.0 |
16.7 |
0.6 |
2.9 |
2.7 |
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Gross fixed investment |
5.1 |
-5.0 |
2.3 |
-14.8 |
18.0 |
1.6 |
3.1 |
2.8 |
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Change in inventories (contribution to GDP growth, percentage points) 1/ |
1.6 |
0.3 |
-0.5 |
0.0 |
0.0 |
-0.2 |
0.0 |
0.0 |
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Net exports (contribution to GDP growth, percentage points) 1/ |
1.1 |
2.7 |
0.4 |
2.5 |
3.3 |
0.6 |
-0.5 |
0.2 |
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Saving and investment (percent of GDP) |
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Gross national saving |
45.4 |
40.5 |
40.8 |
39.1 |
41.1 |
41.3 |
39.4 |
38.1 |
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Gross domestic investment |
27.3 |
24.8 |
24.6 |
22.6 |
23.1 |
21.9 |
22.8 |
22.9 |
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Inflation and unemployment (period average, percent) |
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CPI inflation |
0.6 |
0.4 |
0.6 |
-0.2 |
2.3 |
6.1 |
5.5 |
3.5 |
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CPI inflation, excluding food and energy 2/ |
-0.7 |
-0.1 |
0.4 |
-0.3 |
2.4 |
6.1 |
5.0 |
3.4 |
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MAS core inflation 2/ |
1.5 |
1.7 |
1.0 |
-0.2 |
0.9 |
4.1 |
3.9 |
2.8 |
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Unemployment rate |
2.2 |
2.1 |
2.3 |
3.0 |
2.7 |
2.1 |
1.8 |
1.8 |
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Central government finances (percent of GDP) 3/ |
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Revenue |
18.8 |
17.9 |
17.7 |
17.6 |
17.4 |
17.4 |
17.5 |
18.0 |
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Expenditure |
14.0 |
13.8 |
14.0 |
21.7 |
18.2 |
16.4 |
14.9 |
15.1 |
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Net lending/borrowing |
4.8 |
4.1 |
3.7 |
-4.1 |
-0.8 |
0.9 |
2.6 |
2.9 |
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Net lending/borrowing, excluding nonproduced assets |
1.7 |
1.1 |
1.4 |
-5.8 |
-2.8 |
-1.2 |
0.2 |
0.4 |
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Primary balance 4/ |
-1.5 |
-2.0 |
-1.9 |
-9.5 |
-6.3 |
-4.5 |
-3.2 |
-3.2 |
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Public Debt to GDP |
105.9 |
107.5 |
124.7 |
146.6 |
136.6 |
167.8 |
168.1 |
168.4 |
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Money and credit (end of period, percent change) 5/ |
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Broad money (M2) |
4.2 |
5.1 |
4.4 |
10.7 |
9.7 |
7.8 |
5.3 |
… |
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Credit to private sector |
3.3 |
4.8 |
3.0 |
1.4 |
6.8 |
0.5 |
1.0 |
… |
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Three-month S$ SIBOR rate (percent) |
1.5 |
1.9 |
1.8 |
0.4 |
0.4 |
4.3 |
… |
… |
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Balance of payments (US$ billions) |
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Current account balance |
62.3 |
59.2 |
60.9 |
57.3 |
76.4 |
90.2 |
84.2 |
80.7 |
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(In percent of GDP) |
18.1 |
15.7 |
16.2 |
16.5 |
18.0 |
19.3 |
16.6 |
15.2 |
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Goods balance |
100.9 |
104.4 |
97.8 |
106.4 |
125.7 |
136.5 |
112.1 |
114.9 |
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Exports, f.o.b. |
417.1 |
460.9 |
441.9 |
419.9 |
514.5 |
579.6 |
606.9 |
649.1 |
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Imports, f.o.b. |
-316.2 |
-356.4 |
-344.1 |
-313.5 |
-388.8 |
-443.0 |
-494.8 |
-534.3 |
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Financial account balance 6/ |
33.0 |
46.4 |
71.9 |
-17.5 |
8.5 |
202.6 |
28.3 |
27.4 |
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Overall balance 6/ |
27.4 |
12.5 |
-8.4 |
74.9 |
66.2 |
-114.2 |
55.9 |
53.3 |
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Gross official reserves (US$ billions) |
279.9 |
287.7 |
279.5 |
362.3 |
417.9 |
289.5 |
344.2 |
394.0 |
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(In months of imports) 7/ |
6.0 |
6.3 |
6.4 |
6.9 |
7.1 |
4.5 |
5.0 |
5.4 |
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Singapore dollar/U.S. dollar exchange rate (period average) |
1.38 |
1.35 |
1.36 |
1.38 |
1.34 |
1.38 |
… |
… |
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Nominal effective exchange rate (percentage change) 8/ |
-1.0 |
0.5 |
1.4 |
-2.5 |
0.4 |
6.4 |
… |
… |
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Real effective exchange rate (percentage change) 8/ |
-9.4 |
-5.8 |
4.5 |
-25.1 |
2.3 |
14.4 |
… |
… |
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Memorandum items: |
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Nominal GDP (in billions of Singapore Dollars) |
474.0 |
508.3 |
514.1 |
480.7 |
569.4 |
643.5 |
677.7 |
716.1 |
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Growth (%) |
7.6 |
7.2 |
1.1 |
-6.5 |
18.4 |
13.0 |
5.3 |
5.7 |
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Sources: Data provided by the Singapore authorities; and IMF staff estimates and projections. |
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Note: Data and forecasts as of May 24, 2022. |
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1/ Approximation based on available data. |
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2/ IMF staff estimates, showing projections from 2021. MAS core inflation excludes the costs of accommodation and private transport. |
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3/ IMF staff estimates on a calendar year basis following GFSM 2014. |
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4/ Net lending/borrowing excluding net investment return contribution (NIRC). |
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5/ Data reporting by financial institutions changed since July 2021 after two major changes in MAS’ banking sector regulatory framework took effect, creating a break in the broad money and credit to private sector series. |
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6/ Following the BPM6 sign convention, a positive entry implies net outflows. |
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7/ In months of following year's imports of goods and services. |
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8/ Increase is an appreciation. |
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IMF Communications Department
MEDIA RELATIONS
PRESS OFFICER: Huong Lan Vu
Phone: +1 202 623-7100Email: MEDIA@IMF.org