Country Report Singapore May 2009

Outlook for 2009-10

• Although the ruling People's Action Party (PAP) 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 a policy of fiscal expansion 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 keep monetary policy loose by allowing the Singapore dollar to stay relatively weak. However, it will not permit any rapid drop in the currency's value.
• Real GDP is forecast to shrink by 8.8% in 2009, as the export-dependent economy will suffer during 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 again 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

• As the economy is now facing its worst recession on record, there has been increased speculation that an early election will be called.
• While the PAP appears to be determined to renew itself with younger ministers ahead of the next election, opposition parties claim to be enjoying an increase in the number of young professionals joining their ranks.
• The government has succeeded in pushing a bill through parliament that makes the city state's public order laws even more restrictive.
• The MAS decided in April to recentre the local dollar's trading band at the prevailing level of the currency's nominal effective exchange rate, in effect allowing for a weaker Singapore dollar.
• According to official advance estimates, Singapore's economy suffered its sharpest contraction ever in the first quarter of 2009, when real GDP contracted by an estimated 11.5% year on year.
• Inflation slowed for the sixth month in a row in March, as weakening domestic demand, higher unemployment and lower international commodity prices continued to put downward pressure on prices and wages.
• Singapore's exporters recorded another poor month in March. The value of non-oil domestic exports fell by 17% year on year.

Source: Country Report

This report covers the following industry codes:
SIC Code: 65
NAICS Code: 53