Country Report Singapore

Outlook for 2008-09

• The ruling People's Action Party (PAP) will dominate the political scene in 2008-09. The political reform process will remain slow. Singapore's relations with Malaysia will be influenced by political developments in that country.
• Government efforts to restructure the economy will centre on fiscal policy. Budget surpluses will be recorded in fiscal year 2008/09 (April-March) and 2009/10. The government will seek to create jobs in the services sector.
• The Economist Intelligence Unit expects real GDP growth to decelerate from 7.7% in 2007 to 4.5% in 2008 as a result of the weakening global economic outlook. The economy will expand by 5% in 2009.
• The Singapore Purchasing Managers’ Index fell by 0.1 points in April, to 49.3. This reinforces our view that real GDP growth will decelerate in 2008.
• The Singapore dollar will continue to appreciate against the US dollar, in accordance with the exchange-rate policy aims of the Monetary Authority of Singapore (the central bank).
• The current-account surplus will fall as a percentage of GDP in 2008-09, but will remain substantial both relative to GDP and in US dollar terms.

Monthly review

• The PAP continues to use defamation suits to silence its critics. A veteran politician, J B Jeyaretnam, who officially launched a new party in April, is one of several critics of the PAP to have been bankrupted through such means.
• A ruling by an Indonesia court in early May, ordering Singapore's main investment vehicle, Temasek Holdings, to sell its shares in two Indonesian telecoms companies, could sour relations between the two countries.
• During his Labour Day statement on May 1st, the prime minister, Lee Hsien Loong, called on Singaporeans to prepare themselves for increased economic uncertainty as the global economy deteriorates.
• Mr Lee has stated that the Government Investment Corporation, the main vehicle used to invest the country's foreign-exchange reserves, will not become as transparent as Temasek.
• Economic expansion in the first quarter of 2008 was resilient, but surveys of local businesses indicate that growth during the remainder of the year will not be so robust. A weakening job market will not help the outlook.
• Manufacturing output was surprisingly strong in March, although electronics output fell substantially in year-on-year terms. The export sector recorded healthy growth in April.