Country Report Singapore March 2009

Outlook for 2009-10

• 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 expansionary fiscal policy to support the economy and to 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 7.5%, before growing by 1.9% 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, a contraction in imports will ensure that the current account remains in surplus in 2009-10.

Monthly review

• In an apparent attempt to reduce some of the pressure on the prime minister, Lee Hsien Loong, his wife, Ho Ching, has announced that she will resign as chief executive officer of a sovereign wealth fund, Temasek Holdings.
• The government has said that it may have to draw on its fiscal reserves again next year if the economic recession worsens.
• Amid contracting world trade volume, the aviation and maritime authorities have said that they will provide financial assistance to their customers.
• According to the government, the economy contracted more sharply than was initially estimated in the fourth quarter of 2008. Real GDP shrank by 4.2% year on year, the worst performance since the fourth quarter of 2001.
• A sharp rise in retrenchments in the fourth quarter of 2008 pushed up the seasonally adjusted unemployment rate to 2.6%, its highest level in almost two years.
• Singapores exporters were hit hard by the collapse in global demand in 2008, but January's merchandise exports results suggest that worse is to come. Non-oil domestic exports fell by 35.3% year on year in value terms in January.

Source: Country Report

This report covers the following industry codes:
SIC Code: 10
NAICS Code: 212