Country Report Singapore September 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 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.
• Singapore's export-dependent economy is forecast to contract by 6% in 2009. It will grow by 3.6% in 2010, benefiting from a recovery in the global economy and from fiscal stimulus.
• Singapore will experience 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

• The minister mentor, Lee Kuan Yew, who was independent Singapore's first prime minister, has defended the government's attitudes towards race in a rare speech in parliament.
• The prime minister, Lee Hsien Loong, has said that the economic recovery remains fragile, even though the recession has not been as severe as the government originally expected.
• In what appears to be part of an effort to emphasise its operational independence from the government, one of Singapore's two sovereign wealth funds, Temasek Holdings, has announced a new charter.
• Singapore's export-dependent economy appears to have emerged from recession, recording positive quarter-on-quarter growth in the second quarter of 2009. However, the economy continued to contract on a year-on-year basis.
• The local property market rebounded in July, with sales of residential properties in that month reaching a record 2,767 units, according to the Urban Redevelopment Authority.
• In the second quarter of 2009 the current-account surplus widened to S$7.1bn (US$4.9bn), equivalent to 11.6% of GDP at current prices, up from S$6.3bn in the first quarter.

Source: Country Report