Singapore Business Forecast Report Q2 2009

A Painful Year Ahead Singapore's dazzling growth was brought to a grinding halt in 2008 with advance estimates by the Ministry of Trade and Industry (MTI) indicating that the economy grew by a meager 1.5% last year, a far cry from the 7.7% registered in 2007. With exports expected to remain weak in the foreseeable future and a small domestic base, Singapore has limited drivers to rely upon to pull itself out of recession. The island's economic recovery will largely be dependent on the global economy, which will again spur trade. Due to Singapore's heavy reliance on the external sector and our grim outlook for the global economy this year, we envisage real GDP growth to contract by 2.8% in 2009 before staging a modest recovery to grow by 2.3% in 2010.

Meanwhile, continued political stability and ongoing government actions to mitigate the effects of the slowdown will ensure that Singapore will be able to ride out the current downturn. The government has already planned to bring forward multiple construction projects and we expect more fiscal loosening in the upcoming budget. Recent retraining initiatives launched by the Workforce Development Agency (WDA) will also provide some respite for companies and employees alike.

The agency has also showed awareness that the current downturn may affect white collar workers more severely and has prepared more schemes to limit the unemployment fallout.

The Monetary Authority of Singapore (MAS) will renew its focus on economic growth. Currently, we are expecting the MAS to maintain its neutral stand on the currency, but there remains a chance that the MAS may effect depreciation of the local dollar to boost export competitiveness.

However, concerns over imported inflation may limit the MAS's desire to further weaken the currency.

Nonetheless, we remain bearish on the currency over 2009 in view of its strong resilience in 2008 and Singapore's weak economic performance for the current year.

In spite of strong headwinds buffeting the economy, Singapore is in a good position to catch the next upturn in the global economy. Indeed, Singapore achieved high marks for the infrastructure, institutions and market orientation components of BMI's business environment rating, taking the top position with an overall score of 83.8, ahead of rival Hong Kong. Once the current recession has passed we would expect Singapore to resume its long term growth trajectory of above 4.0%.

• Executive Summary
  • A Painful Year Ahead
• Chapter 1: Political Outlook
  • SWOT Analysis
  • BMI Political Risk Ratings
  • Domestic Politics
  • Government To Prioritise Employment Policies
  • With the newly launched SPURs programme aimed at worker retention and retraining, we believe that the
  • political fallout from the expected rise in unemployment should be limited
  • TABLE: POLITICAL OVERVIEW
• Chapter 2: Economic Outlook
  • SWOT Analysis
  • BMI Economic Risk Ratings
  • Economic Activity
  • A Deep Recession In 2009
  • Recent industrial and trade data suggest that 2009 will prove to be a very painful year for Singapore
  • TABLE: ECONOMIC ACTIVITY
  • Fiscal Policy
  • Fiscal Stimulus Not A Panacea
  • The government has already introduced multiple off-budget initiatives to cope with the difficult economic
  • conditions and more measures are expected when the budget in unveiled on January
  • TABLE: FISCAL POLICY
  • Monetary Policy
  • Deflation Risks Rising
  • With inflation projected to continue its downward trend well into 2009, thus posing a rising risk of deflation, we
  • believe that the Monetary Authority of Singapore (MAS) will maintain its neutral policy for the local currency
  • TABLE: MONETARY POLICY
  • Balance of Payments
  • Overall BoP May Turn Negative Amid Recession
  • Singapores trade balance is likely to narrow over the coming year as we expect the slowdown in global trade to
  • drag slightly more on exports than imports
  • TABLE: BALANCE OF PA YMENTS
• Chapter 3: 10-Year Forecast
  • The Singapore Economy To 2018
  • Solid Growth Trajectory To 2018
  • We are fairly upbeat on Singapores longer term growth prospects to 2018, forecasting a mild recovery from 2010,
  • before a full recovery in 2011, with real GDP forecast to expand at a rate exceeding 4.0% out to 2018
  • TABLE: Long-Term Macroeconomic Forecasts
• Chapter 4: Special Report
  • China
  • A Seismic Upheaval In 2009?
  • One of the biggest and least discussed wild cards that could rear its head in 2009 is dramatic political
  • upheaval in China
  • United States
  • Europe
  • Big Trouble For European Banks In 2009
  • The deteriorating global macroeconomic outlook, high levels of leverage, and a broken business model will
  • combine to spell trouble for the financial services sector in 2009
  • TABLE: Banks Leverage Ratios
  • TABLE: Assets As % of Home Country GDP
  • TABLE: Assets As % of Home Country GDP When Eurozone Is Considered Home Country
  • TABLE: Exposure As % of Total Exposure To Region
  • TABLE: Banks Foreign Exposure (US$ mn)
  • TABLE: Exposure As % of National GDP
• Chapter 5: Business Environment
  • SWOT Analysis
  • BMI Business Environment Risk Ratings
  • Business Environment Outlook
  • TABLE: BMI BUSINESS AND OPERATIONAL RISK RATINGS
  • Institutions
  • TABLE: BMI LEGA L FRAMEWORK RATINGS
  • Infrastructure
  • Market Orientation
  • TABLE: ASIA, FDI ANNUAL INFLOWS
  • TABLE: BMI TRADE RATINGS
  • TABLE: TOP EXPORT DESTINATIONS
  • Operational Risk
• Chapter 6: Key Sectors
  • Food & Drink
• Executive Summary
  • BMI is forecasting fairly moderate growth in food consumption in Singapore in the period to 2013
  • TABLE: FOOD CONSUMPTION INDICATORS HISTORIC DATA & FORECASTS
  • Infrastructure
  • TABLE: CONSTRUCTION INDUSTRY FORECAST
• Chapter 7: BMI Global Assumptions
  • Global
  • TABLE: GLOBAL ASSUMPTIONS
  • TABLE: GLOBAL AND REGIONAL REAL GDP GRO WTH, % chg y-o-y
  • Economic Activity
  • Monetary Policy
  • TABLE: DEVELOPED STATES, REAL GDP GRO WTH FORECASTS
  • TABLE: EMERGING MARKETS, REAL GDP GRO WTH FORECASTS
  • TABLE: DEVELOPED MARKET EXCHANGE RATES
  • Commodities
  • TABLE: EMERGING MARKET EXCHANGE RATES