Country Report Singapore January 2009

Outlook for 2009-10

• The ruling People's Action Party (PAP) will dominate the political scene in 2009-10. However, the government will come under pressure to manage the economy in such a way as to limit the fallout from a global 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 Economist Intelligence Unit forecasts that the economy will contract by 2.9% in 2009. This reflects the fact that Singapores economy is highly exposed to the global economic slowdown.
• Inflation is forecast to fall markedly in 2009-10 from its high average rate of 6.6% in 2008. Domestic demand growth will be sluggish, and global prices for oil and industrial raw materials will fall sharply in 2009.
• Owing to the general strength of the US dollar and the weakness of the Singaporean economy, we forecast a slight depreciation in the Singapore dollar in 2009. The currency will remain weak in 2010.

Monthly review

• There has been an increase in speculation that the prime minister, Lee Hsien Loong, will call an early election. (A poll does not have to be held until parliaments current five-year term ends in 2011.)
• Mr Lee said in December that the economy could take longer to recover from an expected contraction in GDP in 2009 than has been the case in previous recessions.
• In December the government hinted that it might revive public works programmes that had been delayed.
• The latest data continue to point to a slowdown in economic activity. According to the Economic Development Board, manufacturing production was down by 12.6% year on year in October.
• Retail sales have been weak. According to the Department of Statistics, the value of retail sales was down by 3.6% year on year in October, compared with a year-on-year increase of 6.8% in the previous month.
• A quarterly survey of the labour market, conducted by the Ministry of Manpower, has revealed a marked slowdown in the pace of job creation and an increase in the number of workers being laid off.
• Non-oil domestic exports were down in value by 17.5% year on year in Novemberthe fastest pace of deceleration since February 2002.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;59;39
NAICS Code: 52;44;31