Country Risk Service Singapore December 2012 Updater

Country Risk Service Singapore December 2012 Updater

Overview

The Economist Intelligence Unit expects the People's Action Party (PAP) to remain in power during the forecast period, following its victory in the May 2011 general election. Policymakers are monitoring the weak global economic situation to assess the impact on Singapore's trade-driven economy. We expect real GDP growth to remain relatively subdued, at 2.9%, in 2013--reflecting continuing weak global demand--before accelerating to an annual average of 5.3% a year in 2014-17. The average rate of consumer price inflation is forecast to decelerate to 3.7% in 2013, from an estimated 4.5% in 2012. Price increases will moderate further during the remainder of the forecast period, averaging 2.5% a year in 2014-17. As part of its strategy to help to curb inflation, the Monetary Authority of Singapore (the central bank) will support the continued gradual appreciation in the value of the Singapore dollar. The current account will record further large surpluses in 2013-17, owing to the substantial surpluses that will be posted on the merchandise trade account.

Key changes from last month

Political outlook

Although the PAP may support minor electoral reforms during the forecast period, wholesale changes to the voting system remain unlikely.

Economic policy outlook

The government's large fiscal reserves could be used to finance a stimulus programme if weak external demand threatens to cause a protracted slump in domestic economic growth. However, such a programme is not expected at present.

Economic forecast

Reflecting continuing global economic weakness, we have revised down our estimate for real GDP growth in 2012 to 1.5% (from 2.4% previously) and have also cut out our forecast for 2013 real GDP growth to 2.9% (from 4% previously).

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