IMF Executive Board Concludes 2018 Article IV Consultation with Singapore
IMF News, July 27, 2018
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- Published: July 27, 2018
Executive summary and macro outlook
- On July 20, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Singapore.
- Recent performance:
- Real GDP growth reached 4.4 percent in 2018Q1 compared to a year ago and the 2017 average of 3.6 percent.
- Headline consumer price inflation turned positive in 2017 after nearly two years below zero; MAS core inflation was largely unchanged at 1.5 percent in the first four months of 2018.
- The current account surplus has remained substantial and broadly unchanged as a share of GDP in the past few years.
- Outlook and risks:
- Economic growth is expected to normalize toward its potential rate of about 2¾ percent, starting in 2018.
- Strengthening labor market conditions should support higher inflation going forward.
- Near-term risks are broadly balanced and stem from external sources: intensification of trade tensions, tighter financial conditions, and slower-than-expected growth in major trading partners (downside); continued strength in global electronics trade and higher-than-expected spillover from U.S. fiscal stimulus (upside).
- Medium-term priority: successful transition to a new growth model adopting general purpose digital technologies, innovation, skill upgrading, and greater inclusion to help rebalance the economy.
Executive Board assessment and policy recommendations
- General assessment:
- Directors commended the authorities for strong and strategic stewardship and pro-active approach to structural transformation.
- Challenges include an evolving external environment, demographics, and technological change.
- Monetary policy:
- The commencement in April of monetary policy normalization was considered appropriate given cyclical strength and labor market recovery.
- Further normalization should be data dependent and taken in response to clear signs of inflationary pressures.
- Fiscal policy:
- Directors welcomed the planned fiscal impulse under the FY2018/19 budget to boost infrastructure and aging-related healthcare services, easing supply constraints and facilitating external rebalancing.
- Additional stimulus would be appropriate if downside risks materialize; fiscal policy should be the first line of defense if growth and inflation undershoot.
- For the medium term, Directors noted the need to maintain fiscal sustainability against higher recurrent spending needs from demographics.
- Fiscal options to consider: a lower budget surplus and bringing on budget more of the government’s asset income, a higher goods and services tax (GST), and borrowing for infrastructure spending.
- External position:
- Singapore’s external position is strong. The current account surplus is expected to narrow gradually over the medium term as private investment recovers and public capital spending rises.
- Some Directors saw scope for fiscal and structural policies to reduce external surpluses and urged strengthening social insurance arrangements to lower private precautionary saving.
- Financial sector and macroprudential policy:
- Financial sector remains healthy with adequate buffers and strong balance sheets for banks, households, and corporates, but pockets of vulnerabilities require monitoring.
- Directors welcomed efforts to strengthen the regulatory framework in line with Basel III and to enhance the AML/CFT framework.
- Continued support for FinTech development was encouraged, with regulation adapting to emerging risks.
- The upcoming FSAP intends to examine financial sector issues in detail.
- Property markets: welcome continued monitoring and appropriate adjustment of macroprudential measures; residency-based differentiation in the stamp duty (ABSD) should be eliminated and the measure phased out once systemic risks dissipate.
- Structural and labor market policies:
- Directors commended plans to harness automation and digital technologies to drive productivity, including targeted incentives for firms and reskilling/lifelong learning for workers.
- Encouraged fostering competition and innovation, including support for new, dynamic firms.
- Supported adopting broader social insurance arrangements to help workers cope with technological disruptions.
Selected economic and financial indicators (highlights)
- Nominal GDP (2017): US$324 billion
- Population (June 2017): 5.61 million
- GDP per capita (2017): US$57,737
- Main goods exports (2017, percent of total exports):
- Electronic products (33 percent); mineral fuels (18 percent); and chemical products (14 percent).
- Top three destinations for goods exports (2017, percent of gross goods exports):
- China (14 percent); Hong Kong SAR (12 percent); and Malaysia (11 percent).
Key historical and projected figures (selected series, 2013–19)
- Real GDP growth (percentage change):
- 2013: 5.1
- 2014: 3.9
- 2015: 2.2
- 2016: 2.4
- 2017: 3.6
- 2018 (projection): 2.9
- 2019 (projection): 2.7
- Total domestic demand (percentage change):
- 2013: 5.2; 2014: 2.3; 2015: 0.5; 2016: 3.1; 2017: 5.4; 2018: 3.0
- Gross national saving (percent of GDP):
- 2013: 47.2; 2014: 48.8; 2015: 45.7; 2016: 46.0; 2017: 46.5; 2018: 46.4; 2019: 45.8
- Gross domestic investment (percent of GDP):
- 2013: 30.7; 2014: 30.2; 2015: 27.1; 2016: 27.0; 2017: 27.6; 2018: 28.2; 2019: 27.9
- Central government finances (percent of GDP) — selected:
- Revenue: 2013: 21.6; 2014: 21.2; 2015: 21.4; 2016: 21.9; 2017: 22.6; 2018: 21.8
- Expenditure: 2013: 14.6; 2014: 15.4; 2015: 17.7; 2016: 18.1; 2017: 18.0; 2018: 18.9; 2019: 20.0
- Net lending/borrowing: 2013: 7.0; 2014: 5.8; 2015: 4.6
- Balance of payments (US$ billions):
- Current account balance: 2013: 50.3; 2014: 58.2; 2015: 56.5; 2016: 58.8; 2017: 61.0; 2018: 63.6; 2019: 65.7
- (In percent of GDP) 2013: 16.5; 2014: 18.7; 2015: 18.6; 2016: 19.0; 2017: 18.8; 2018: 18.2
- Gross official reserves (US$ billions): 2013: 273.1; 2014: 256.9; 2015: 247.7; 2016: 246.6; 2017: 279.9; 2018: 294.0; 2019: 301.9
- Exchange rates and price indices:
- Singapore dollar/U.S. dollar exchange rate (period average): 2013: 1.25; 2014: 1.27; 2015: 1.37; 2016: 1.38
- Nominal effective exchange rate (percentage change): 2013: 2.6; 2014: -0.3
- Real effective exchange rate (percentage change): 2013: -2.0
IMF Press Release No. 18/316, July 27, 2018.
