IMF Staff Completes 2024 Article IV Mission to Singapore

IMF News, May 16, 2024

Source details

Mission dates: May 7–16, 2024.
Press release: Press Release No. 24/166, May 16, 2024.
Summary assessment: Singapore’s economy is recovering, driven mainly by strengthening external demand; gradual disinflation is underway, with risks to inflation tilted to the upside.
Labor market: Conditions started to ease last year amid weaker GDP growth; nominal wage growth slowed in Q4 2023, but unemployment remains low.

IMF staff projects GDP growth to recover to 2.1 percent in 2024 from 1.1 percent in last year.
Growth drivers: continued recovery in manufacturing, tourism, and consumer-facing services.
Risks to the growth outlook:
- Steeper than projected slowdown in China.
- Prolonged tight US monetary policy.
- Deeper geoeconomic fragmentation.
- Stronger global growth would have positive spillovers to Singapore.

MAS core inflation (excluding accommodation and private transport) decreased to 3.1 percent in March 2024.
IMF staff projects headline and MAS core inflation to moderate to 3 percent in this year.
IMF staff expects MAS core inflation to stabilize at around 2 percent by 2025.
Monetary policy guidance and risks:
- Current stance: appropriately tight and geared towards continued disinflation.
- Recommendation: Monetary policy should remain tight until inflationary pressures firmly recede.
- Once disinflation is firmly in sight, monetary policy should be adjusted in a timely manner, guided by data and clearly communicated.
- Upside inflation risks highlighted:
- Intensification of geopolitical conflicts could increase volatility in global energy and food prices.
- Still tight labor market and accumulated cost pressures from high past wage growth could lead to continued inflation stickiness, particularly for services.

FY2024 fiscal stance: broadly neutral, as implied by the FY2024 budget, with targeted support to vulnerable households and firms.
Assessment: Broadly neutral fiscal stance is appropriate and expected to complement tight monetary policy toward achieving price stability.
Fiscal strength and challenges:
- Singapore has strong public finance and fiscal institutions anchored by the balanced budget rule.
- Well positioned to address future downside risks and medium- and long-run spending needs from rapid ageing, the need to raise productivity, and climate-change risks.

General assessment: Financial sector remains sound, supported by solid capital and liquidity buffers.
Recommendations to maintain resilience:
- Continued maintenance of adequate provisioning buffers.
- Rigorous stress testing.
- Prudent risk management practices across banks.
Non-bank financial institutions: Have weathered a rise in interest rates well.
Vulnerabilities and macroprudential stance:
- A sudden downward adjustment in housing prices could pose a systemic risk for the financial sector.
- Pockets of vulnerabilities could emerge during stress episodes.
- The tight macroprudential policy stance remains appropriate; continued vigilance is warranted.

Forward Singapore initiative: Welcomed by the IMF team.
Reforms envisaged under Forward Singapore highlighted by the IMF team:
- Strengthening social safety nets.
- Strengthening healthcare and pension systems.
- Expanding lifelong learning programs.
- Promoting inclusive growth amid rapid population ageing and technological advancements, including in Artificial Intelligence.
Climate policy: IMF team welcomes robust climate policies implemented in Singapore.

IMF Staff Completes 2024 Article IV Mission to Singapore. Press Release No. 24/166, May 16, 2024.