Country Report Singapore April 2009

Summary

Although the ruling People's Action Party will remain the dominant force in politics in 2009-10, it will face challenges to its authority and popularity amid a severe economic downturn.
The government will rely on a policy of fiscal expansion to support the economy and prevent a deep and prolonged recession. The government's fiscal reserves are plentiful, enabling it to raise spending.
The Monetary Authority of Singapore (MAS, the central bank) will keep monetary policy loose. Although targeting zero currency appreciation, the MAS will permit the nominal effective exchange rate to depreciate this year.
In the light of the latest data, the Economist Intelligence Unit has revised down its GDP forecast for 2009, and now expects the economy to shrink by 8.8% this year, compared with a projected contraction of 7.5% previously.
Annual inflation is forecast to fall to less than 1% in 2009-10, from a high of 6.5% in 2008. This reflects a contraction in domestic demand and falling global prices for oil and industrial raw materials.
Despite the forecast drop in export revenue, a contraction in imports will ensure that the current account remains in surplus in 2009-10.

The prime minister, Lee Hsien Loong, reshuffled his cabinet in March. According to an official statement, the reshuffle was aimed at providing a younger generation of politicians with ministerial experience.
Mr Lee has called on Myanmar's reclusive military junta to open up to the outside world. He reiterated in March that the most effective means of achieving democratic reform in Myanmar is by constructive engagement.
Government officials have hinted that Singapore's economy could contract by 8% in 2009, a much faster pace than the government's current forecast contraction of 2-5%.
In March the government announced its plans to relax the city state's strict bank-secrecy rules.
Manufacturing output continued to fall in February, although the year-on-year decline of 22.4% was less precipitous than that in the previous month, when output contracted by 29.8%.
Parts of the services sector are also showing signs of weakness. According to the latest data from the tourism sector, the downward trend in tourist arrival numbers is starting to undermine hotel revenue in the city state.

Source: Country Report

This report covers the following industry codes:
SIC Code: 49;60;70
NAICS Code: 22;52;72