Country Report Singapore July 2009

Outlook for 2009-10

• Despite recently proposed political reforms, the ruling People's Action Party (PAP) will remain the dominant force in politics in 2009-10. However, it will face challenges to its authority and popularity amid the economic downturn.
• The government will rely on a policy of fiscal expansion to reduce the impact of the global recession on the domestic economy. The government's fiscal reserves are plentiful, enabling it to raise spending.
• The Monetary Authority of Singapore (the central bank) will keep monetary policy loose by allowing the Singapore dollar to stay relatively weak. However, it will not permit a rapid drop in the currency's value.
• Real GDP is forecast to shrink by 8.6% in 2009, as the export-dependent economy will suffer in the global economic downturn. The economy will enjoy only a modest rebound in 2010.
• Singapore will record mild deflation in 2009, owing to the forecast contraction in domestic demand and falling global prices for oil and industrial raw materials. Prices will rise in 2010, but only marginally.
• Despite the forecast drop in export revenue, a contraction in imports will ensure that the current account remains in surplus in 2009-10.

Monthly review

• Singapore's previous prime minister, Goh Chok Tong, has called on Myanmar's ruling generals to permit an imprisoned pro-democracy leader, Aung San Suu Kyi, to campaign in the general election due in 2010.
• In June the Ministry of Finance announced that Singaporeans would receive the second instalment of tax credits promised in the budget for fiscal year 2009/10 (April-March) on July 1st.
• In May the government set up an Economic Strategies Committee. The committee has been given the task of devising new strategies to spur economic growth over the long term.
• Monthly economic indicators for April and May suggest that the economy may have hit bottom in the first quarter. Manufacturing output increased by 2% year on year in May, marking two consecutive months of gains.
• Although Singapore's non-oil domestic exports (NODX) fell by 12% year on year in May, the pace of decline was much slower than in the previous month, when NODX plummeted by 19.2%.
• Singapore continues to experience deflationary pressures. In May overall consumer prices were down by 0.3% year on year.

Source: Country Report