Singapore: Staff Report for the 2014 Article IV Consultation

IMF Staff Country Reports, October 17, 2014

Source details

Following an upturn in 2013, growth is expected to moderate somewhat during 2014-2015, narrowing the positive output gap.
The impact of recovering demand in advanced economies is likely to be offset by:
- the ongoing real appreciation of the currency, and
- the gradual tightening in global monetary conditions.
Transitional costs related to the economic restructuring are expected to dampen growth in the near term.
As a very open economy, Singapore is particularly exposed to external risks:
- a protracted period of slower growth in advanced and emerging economies,
- a continued buildup and eventual unwinding of excess capacity in China,
- an abrupt surge in financial market volatility as investors reassess underlying risks,
- geopolitical risks.

The authorities focus squarely on the implementation of their medium-term economic restructuring plan.
The plan aims to boost the productivity of labor and land and could set the stage for a new era of sustainable growth.
Productivity improvements may take some time to materialize.
The slowing inflow of foreign workers, a key part of the reform agenda, could:
- moderate potential growth, and
- lower competitiveness in light of the tight labor market.
The social safety net is being strengthened in the context of a rapidly aging population.

Macroeconomic and financial sector policies are assessed as strong.
Monetary policy:
- The moderately tight monetary policy remains appropriate.
Fiscal policy:
- The fiscal stance is looser than would be warranted by cyclical considerations.
- The 2014 budget focuses on noncyclical considerations, including:
- support for companies’ efforts to raise productivity, and
- additional social spending on healthcare for the elderly.
- The authorities’ plan to raise social and infrastructure spending by 1-2 percent of GDP over the medium term should help reduce the large current account surplus.
Financial sector and regulation:
- Financial regulation and supervision is among the best globally.
- Singapore is a frontrunner in implementing global regulatory reforms.
- Macroprudential policies have contributed to cool the housing and car permit markets.
- Good progress has been made in implementing key short•term FSAP recommendations.

Source: IMF Staff Report — Singapore: Staff Report for the 2014 Article IV Consultation (October 17, 2014).