Country Report Singapore December 2008

Outlook for 2009-10

• The ruling People's Action Party (PAP) will dominate the political scene in 2009-10. However, the people's trust in the government will be tested over the next year or so as the economy shrinks.
• The government will rely on an expansionary fiscal policy orientation to support the economy and prevent a deep and prolonged recession. The government's fiscal reserves are plentiful, enabling it to raise spending.
• The Economist Intelligence Unit forecasts that the economy will contract by 2.2% in 2009. This reflects the fact that Singapores economy is highly exposed to the global economic slowdown.
• Inflation is forecast to ease markedly in 2009-10 from the high of 6.6% reached this year. Domestic demand growth will be sluggish, and global prices for oil and industrial raw materials will fall sharply in 2009.
• Owing to the general strength of the US dollar and the weakness of the Singaporean economy, we forecast a slight depreciation in the Singapore dollar in 2009. The currency will remain weak in 2010.
• The current-account surplus will shrink over the next two years, but will remain sizeable.

Monthly review

• The prime minister, Lee Hsien Long, has said that Singapore is not yet ready for a non-ethnic-Chinese leader, as race still influences voters choices at the ballot box.
• The government is not due to present its next budget until January 22nd, but the authorities have announced a series of measures aimed at assisting local companies in contending with a shortage of credit.
• Singapore's economy contracted by a worse than expected 0.6% year on year in the third quarter of 2008, compared with an expansion of 2.3% in the second quarter.
• The real estate market has begun to show signs of stress. Prices for private residential properties fell by 2.4% quarter on quarter in the third quarter of 2008, compared with a rise of 0.1% in the second quarter.
• Even the world's first Formula 1 motor sport night race was not enough to reverse a decline in tourist arrivals that began in June. Visitor arrivals in September stood at 739,000, representing a fall of 4.1% year on year.
• In the third quarter of 2008 the balance of payments (before official financing) moved into a deficit for the first time in six years as capital was shifted offshore.

Source: Country Report

This report covers the following industry codes:
SIC Code: 49;65;70
NAICS Code: 22;53;72