IMF Executive Board Concludes 2023 Article IV Consultation with Singapore
IMF News, August 29, 2023
Source details
- Canonical URL
- IMF Executive Board Concludes 2023 Article IV Consultation with Singapore
Other formats
Bibliographic details
- Published: August 29, 2023
Near-term macroeconomic outlook and recent performance
- Singapore’s post-pandemic recovery is nearly complete.
- Real GDP growth:
- Rebound of 8.9 percent in 2021.
- Moderated to 3.6 percent in 2022.
- Weakened to 0.4 percent (year on year) in 2023Q1, reflecting weaker global demand.
- Sectoral performance:
- Consumer-facing services (except the retail sector) and construction remained below pre-pandemic levels.
- Inflation:
- Elevated and broad-based at about 5.7 percent in April 2023, despite recent signs of moderation.
- Inflation expectations remain well-anchored.
Policy assessment and recommendations
- Monetary policy:
- 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.
- 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.
- Fiscal policy:
- 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.
- 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.
- Given softening 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 concurred that Singapore is well-positioned to increase spending to address medium- and long-term challenges; higher public investment and expansion of social services would help reduce large external surpluses and support stronger consumption.
- Financial sector and macroprudential stance:
- Directors considered the financial sector remains sound and welcomed authorities’ commitment to safeguard stability.
- Encouraged continued monitoring of highly leveraged corporates, particularly SMEs, and households, as well as liquidity positions in banks and non-bank financial institutions.
- 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.
- Took positive note of progress implementing the 2019 FSSA recommendations and encouraged continued enhancement of the AML/CFT framework.
- Structural and longer-term policies:
- Directors welcomed authorities’ commitments to accelerate Singapore’s economic transformation toward a green, digital, and more inclusive economy, as illustrated by steps in the FY2023 budget.
- Underscored importance of climate-related measures and active labor market policies to prepare the country for sustained, resilient growth.
Outlook and risks
- Growth projection and inflation:
- 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.
- External sector:
- 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.
- Directors noted Singapore’s external position remained substantially stronger in 2022 than warranted by fundamentals and desired policies, while acknowledging uncertainties around the external sector assessment (ESA) estimates.
- Risks:
- Downside risks mainly from worsening external conditions, including a slowdown in trading partners, and tightening global financial conditions.
- Persistent inflation risks could damage the basis for sustained growth if not addressed.
Key statistics and selected indicators (2017–24, as presented)
- Nominal GDP (2022): US$466.7 billion
- Population (2022): 5.6 million
- GDP per capita (2022): US$82,794
- Main goods exports (2022, percent of total non-oil goods exports):
- machinery & transport equip. (63.1 percent);
- chemical products (14.4 percent);
- misc. manufactured articles (9.8 percent).
- Top three destinations for goods exports (2022, percent of gross goods exports): China (12.4 percent); Hong Kong SAR (11.2 percent); Malaysia (10.0 percent).
- Growth (percentage change) — Real GDP (selected years):
- 2017: 4.5
- 2018: 3.6
- 2019: 1.3
- 2020: -3.9
- 2021: 8.9
- 2022: 1.0
- 2023: 2.1 (projection)
- Savings and investment (percent of GDP):
- Gross national saving: 45.4 (2017); 40.5 (2018); 40.8 (2019); 39.1 (2020); 41.1 (2021); 41.3 (2022); 39.4 (2023); 38.1 (2024)
- Gross domestic investment: 27.3 (2017); 24.8 (2018); 24.6 (2019); 22.6 (2020); 23.1 (2021); 21.9 (2022); 22.8 (2023); 22.9 (2024)
- Inflation and unemployment (period average, percent):
- CPI inflation (selected): 6.1; 5.5; 3.5
- CPI inflation, excluding food and energy (IMF staff estimates): -0.7; -0.1; -0.3; 2.4; 5.0; 3.4
- MAS core inflation 2/: 1.5; 0.9
- Unemployment rate: 3.0
- Central government finances (percent of GDP):
- Revenue: 18.8; 17.9; 17.7; 17.6; 17.4; 17.5
- Expenditure: 14.0; 13.8; 21.7; 18.2; 16.4; 14.9; 15.1
- Net lending/borrowing: 3.7; -4.1; -0.8; 2.6
- Primary balance 4/: -1.5; -2.0; -1.9; -9.5; -6.3; -4.5; -3.2
- Public Debt to GDP: 105.9; 107.5; 124.7; 146.6; 136.6; 167.8; 168.1; 168.4
- Balance of payments (US$ billions):
- Current account balance: 62.3; 59.2; 60.9; 57.3; 76.4; 90.2; 84.2; 80.7
- (In percent of GDP): 18.1; 15.7; 16.2; 16.5; 19.3; 16.6; 15.2
- Exports, f.o.b.: 417.1; 460.9; 441.9; 419.9; 514.5; 579.6; 606.9; 649.1
- Imports, f.o.b.: -316.2; -356.4; -344.1; -313.5; -388.8; -443.0; -494.8; -534.3
- Financial account balance 6/: 33.0; 46.4; 71.9; -17.5; 8.5; 202.6; 28.3; 27.4
- Overall balance 6/: 12.5; -8.4; 74.9; 66.2; -114.2; 55.9; 53.3
- Gross official reserves (US$ billions): 279.9; 287.7; 279.5; 362.3; 417.9; 289.5; 344.2; 394.0
- (In months of imports) 7/: 6.0; 6.3; 6.4; 6.9; 7.1; 5.4
- Exchange rates and effective rates:
- Singapore dollar/U.S. dollar exchange rate (period average): 1.38; 1.35; 1.36; 1.34
- Nominal effective exchange rate (percentage change) 8/: -1.0; -2.5
- Real effective exchange rate (percentage change) 8/: -9.4; -25.1; 14.4
- Memorandum items — Nominal GDP (in billions of Singapore Dollars):
- 474.0; 508.3; 514.1; 480.7; 569.4; 643.5; 677.7; 716.1
- Growth (%): 7.6; 7.2; -6.5; 18.4; 13.0; 5.7
- Notes:
- Data and forecasts as of May 24, 2022.
- 1/ Approximation based on available data.
- 2/ IMF staff estimates, showing projections from 2021. MAS core inflation excludes the costs of accommodation and private transport.
- 3/ IMF staff estimates on a calendar year basis following GFSM 2014.
- 4/ Net lending/borrowing excluding net investment return contribution (NIRC).
- 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.
- 6/ Following the BPM6 sign convention, a positive entry implies net outflows.
- 7/ In months of following year's imports of goods and services.
- 8/ Increase is an appreciation.
Press Release No. 23/295 — August 29, 2023. IMF Communications Department.