Country Report Singapore February 2009

Outlook for 2009-10

• The ruling People's Action Party will dominate the political scene in 2009-10. However, it may call an early election to reaffirm its mandate in the face of a sharp economic recession.
• The government will rely on expansionary fiscal policy 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 maintain a loose monetary policy stance. Although targeting zero appreciation, the MAS will permit a depreciation in the nominal effective exchange rate this year.
• The Economist Intelligence Unit forecasts that the economy will contract sharply in 2009, plunging by 7.2%, before picking up slightly in 2010. This reflects the fact that the economy is highly exposed to the global downturn.
• Inflation is forecast to fall markedly 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, owing to the contraction in imports the current account will remain in surplus in 2009-10.

Monthly review

• A deputy prime minister, Wong Kan Seng, has said that the government may permit the police to take pre-emptive action to prevent protests and other unlawful acts of civil disobedience.
• The government has announced an unprecedented expansionary budget, with total planned expenditure (excluding a range of "special transfers") set at a record S$43.6bn (US$29.1bn) for fiscal year 2009/10 (April-March).
• The main component of the stimulus package in the 2009/10 budget is a S$4.5bn Jobs Credit programme, which is aimed at avoiding mass lay-offs by firms struggling to stay afloat.
• According to preliminary data, real GDP contracted by 3.7% year on year in the fourth quarter, representing the sharpest contraction for seven years.
• Inflation slowed sharply in December. According to the Department of Statistics, the consumer price index rose by 4.3% year on year.
• Singapore's real estate market continues to slow—overall prices of residential property fell by 6.1% quarter on quarter in the fourth quarter of 2008.
• Singapore's exporters had their worst month in almost seven years in December 2008, as non-oil domestic export receipts (in Singapore dollars) fell by 20.8% year on year.

This report covers the following industry codes:
SIC Code: 60;47;1;65
NAICS Code: 52;48;11;53