Country Forecast Singapore August 2012 Updater

Country Forecast Singapore August 2012 Updater

Overview

The Economist Intelligence Unit expects the People's Action Party (PAP) to remain in power during the forecast period, following its victory in the May 2011 general election. Policymakers are monitoring the weak global economic situation to assess the potential for Singapore's trade-driven economy to suffer a marked slowdown. We expect real GDP growth to slow to 2.6% in 2012, from 4.9% in 2011, but economic growth will pick up pace again from 2013. Consumer price inflation is forecast to decelerate from an average of 5.2% in 2011 to 4.4% in 2012. The rate of price increases will moderate further during the remainder of the forecast period, averaging 2.7% a year in 2013-16. As part of its strategy to help to curb inflation, the Monetary Authority of Singapore (the central bank) will support the continued gradual appreciation in the value of the Singapore dollar. The current account will record further large surpluses in 2012-16, owing to the substantial surpluses that will be posted on the merchandise trade account.

Key changes from last month

Political outlook

Although the PAP may support minor electoral reforms during the forecast period, wholesale changes to the voting system remain unlikely.

Economic policy outlook

The government's large fiscal reserves could be used to finance a stimulus programme should weak external demand depress domestic economic growth. However, such a programme is not expected at present.

Economic forecast

In reaction to weaker than expected second-quarter GDP data, we have revised down our forecast of growth in 2012 to 2.6%, from 3.1% previously. Advance estimates indicate that real GDP contracted by 1.1% quarter on quarter on a seasonally adjusted, annualised basis in the second quarter. In addition, we have downgraded our GDP forecast for 2013 to 4%, from 4.2% previously, reflecting Singapore's heavy exposure to the global economy.

Please Note: Due to the Nature of This Report The Toc is Not Available