Country Report Singapore August 2012

Country Report Singapore August 2012

Outlook for 2012-16

• 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 will continue to monitor international economic developments closely. Singapore is among the most vulnerable countries in South-east Asia to declining demand in Western economies.
• Reflecting the high exposure of Singapore's economy to the global economic slowdown, we have revised down our forecast of real GDP growth this year to 2.6%, from 3.1% previously. However, growth will pick up pace in 2013-16.
• The budget surplus is forecast at the equivalent of 0.1% of GDP 2012. We then expect a combination of rising government revenue and subdued spending growth to lead to fiscal surpluses averaging 1.4% of GDP in 2013-16.
• We expect consumer prices to rise by an average of 4.4% this year, compared with 5.2% in 2011. Inflation will average 2.7% a year in 2013-16.
• In April the Monetary Authority of Singapore (MAS, the central bank) tightened policy by increasing the Singapore dollar's rate of appreciation. The currency will remain strong in 2012-16, reducing inflationary pressures.
• The current account will remain substantially in surplus in the forecast period, owing to healthy surpluses on the merchandise trade account.

Review

• Singapore's prime minister, Lee Hsien Loong, visited India in July. The possibility of renewing the bilateral trade and investment agreement signed seven years ago formed a major focus for discussions.
• Advance estimates indicate that real GDP contracted by 1.1% quarter on quarter on a seasonally adjusted, annualised basis in April-June 2012, sharply reversing the 9.4% expansion recorded on this basis in January-March.
• Headline inflation edged up in June, with consumer prices rising by 5.3% year on year. The increase was driven by higher housing and transport costs.
• Following the release of the June inflation data, the MAS revised its forecast of headline inflation in 2012 to 4-4.5%, from 3.5-4.5% previously. At the same time, it noted that its current monetary stance remained "appropriate".
• Non-oil domestic exports rose by 6.8% year on year to S$16bn (US$12.8bn) in June, doubling their pace of expansion in May.
• Although visitor arrivals increased by 15% year on year to nearly 3.6m in the first quarter of 2012, tourists appear to be cutting back on their spending.

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