IMF Executive Board Concludes 2024 Article IV Consultation with Singapore
IMF News, July 31, 2024
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- Published: July 31, 2024
Overview
- The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Singapore. (Press Release No. 24/297)
- Date on page: July 31, 2024.
Growth and Outlook
- Singapore continues to follow a path of gradual recovery.
- Growth figures:
- Growth moderated to 1.1 percent in 2023 mainly due to a contraction in manufacturing in 2023H1, originating from the downturn in the global electronics cycle.
- Growth strengthened to 2.7 percent (year-on-year) in 2024Q1, supported by strong inbound tourism.
- Projections (selected):
- Real GDP growth: 2023: 1.1; 2024: 2.1; 2025: 2.3.
- Total domestic demand 1/: 2023: -0.1; 2024: 2.6.
- Final domestic demand 1/: 2023: 2.2; 2024: 2.5.
- Gross fixed investment: 2023: -5.8; 2024: 3.3.
- Directors noted downside risks to growth have diminished with improvement in external demand.
Inflation and Labor Market
- Inflation developments:
- Headline inflation declined to 2.7 percent in April 2024.
- MAS core inflation decreased to 3.1 percent in April 2024 (MAS core inflation excludes the costs of accommodation and private transport but includes food and energy prices).
- Two-year ahead inflation expectations based on consensus forecasts have been well-anchored at around 1.8 percent.
- Directors expect gradual disinflation but highlight significant upside inflation risks from a tight labor market and high volatility in global energy and food prices.
- Labor market:
- Unemployment rate remained low at 2.1 percent in 2024Q1.
- Job vacancy to unemployed persons ratio still exceeded the pre-pandemic level.
- Labor market conditions started to ease in 2023 amid weaker GDP growth and an inflow of foreign workers.
External Sector and Reserves
- Current account and trade:
- Current account balance (US$ billions): 2018: 60.2; 2019: 60.5; 2020: 58.0; 2021: 86.1; 2022: 89.7; 2023: 99.1; 2024: 94.8; 2025: 97.7.
- Current account (percent of GDP): 2018: 16.0; 2019: 19.8; 2020: 18.0.
- Goods balance (US$ billions): 2018: 104.0; 2023: 154.8; 2024: 115.9; 2025: 122.0.
- Exports, f.o.b. (US$ billions): 2018: 460.4; 2023: 545.9; 2024: 555.9; 2025: 584.5.
- Imports, f.o.b. (US$ billions): 2018: -356.4; 2023: -391.2; 2024: -440.0; 2025: -462.5.
- Reserves and external position:
- Gross official reserves (US$ billions): 2018: 287.7; 2019: 279.5; 2020: 362.3; 2021: 289.5; 2022: 351.0; 2023: 396.1; 2024: 449.0.
- Reserves (in months of imports): 2018: 6.2; 2019: 6.4; 2020: 5.6; 2021: 6.0.
- Directors' view:
- Singapore’s external position remained substantially stronger in 2023 than warranted by fundamentals and desired policies, while acknowledging uncertainties around the external sector assessment (ESA) estimates.
- Many Directors expected external current account surpluses to moderate over the medium-term due to population ageing, slowing income growth, and anticipated increases in healthcare and climate related spending.
- Higher public spending and stronger social safety nets would reduce Singapore’s large external surpluses.
Fiscal Policy and Public Finances
- Directors' assessment:
- Broadly neutral fiscal policy stance will help moderate price pressures while appropriately providing support to vulnerable households and firms.
- Singapore is well-positioned to increase government spending to address medium- and long-term challenges, given its strong public finance and fiscal institutions.
- A slower pace of fiscal surplus accumulation within the government’s balanced budget rule in the coming years could help accommodate the spending needs.
- Central government finances (percent of GDP) selected series:
- Revenue: 2018: 17.9; 2019: 17.7; 2020: 17.5; 2021: 17.0; 2022: 16.6; 2023: 18.1; 2024: 18.5; 2025: 18.6.
- Expenditure: 2018: 13.8; 2019: 14.0; 2020: 21.6; 2021: 17.8; 2022: 15.4; 2023: 15.2; 2024: 14.3; 2025: 15.6.
- Net lending/borrowing (selected): 2020: -4.1; 2021: -0.8.
- Primary balance 4/: 2018: -2.0; 2019: -1.9; 2020: -9.4; 2021: -6.2; 2022: -2.9; 2023: -3.2.
- Public Debt to GDP: 2018: 107.5; 2019: 124.7; 2020: 146.1; 2021: 133.4; 2022: 157.1; 2023: 170.8; 2024: 175.0; 2025: 175.6.
Monetary Policy and Macroprudential Stance
- Directors supported the authorities’ tight monetary policy stance and noted it should remain in place until inflationary pressures firmly recede.
- Monetary policy should continue to be data dependent and articulated through clearly communicated policy decisions.
- Directors concurred that the tight macroprudential policy stance is appropriate and should be maintained to prevent the buildup of systemic risks from the housing market.
Financial Sector Soundness and Risks
- Banking sector:
- Continues to demonstrate ample capital buffers, sound asset quality, high profitability, and a comfortable liquidity position.
- Authorities should continue monitoring banks' cross-border and foreign exchange exposures.
- Non-bank financial institutions:
- Mainly comprising investment funds and insurers, have weathered stresses from the high interest rates well.
- Directors noted linkages between non-bank financial institutions and banks warrant continued monitoring.
- Corporate and household vulnerabilities:
- High borrowing costs encouraged the nonfinancial corporate sector and households to deleverage.
- Directors recommended vigilance against a small segment of highly leveraged corporates and households.
Structural Reforms, Inclusion, and Climate
- Directors welcomed the authorities’ efforts to promote a more inclusive, resilient, and greener economy.
- Forward Singapore initiative:
- Aims to address rapid population ageing and technological advancements, including Artificial Intelligence, through stronger social safety nets and lifelong learning.
- Climate policy:
- Directors welcomed robust implementation of climate policies, including the planned increase in carbon taxes and improved climate risk management for the financial sector.
Key Statistics and Memoranda (selected exact figures)
- Nominal GDP (2023): US$501.4 billion
- Population (2023): 5.9 million
- GDP per capita (2023): US$84,734
- Main goods exports (2022, percent of total non-oil goods exports):
- machinery & transport equip.: 63.1 percent
- chemical products: 14.4 percent
- misc. manufactured articles: 9.8 percent
- Top three destinations for goods exports (2022, percent of gross goods exports):
- China: 12.4 percent
- Hong Kong SAR: 11.2 percent
- Malaysia: 10.0%
- Three-month S$ SIBOR rate (percent): 1.8
- Broad money (M2) (end of period, percent change): 10.7; 7.8; 3.2; …
- Credit to private sector (end of period, percent change): 6.8
- Nominal GDP (in billions of Singapore Dollars): 2018: 508.4; 2019: 514.2; 2020: 482.2; 2021: 583.2; 2022: 687.2; 2023: 673.3; 2024: 707.5; 2025: 741.9
- Note on data: Data and forecasts as of May 24, 2022. 1/ Approximation based on available data. 2/ IMF staff estimates. 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 2022 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.
Source: IMF Executive Board Concludes 2024 Article IV Consultation with Singapore (Press Release No. 24/297).