20220720-IMF-Singapore_2022_Article_IV_Consultation-Press_Release_Staff_Report_and_Statement_by_the_Executive_Director_for_Singapore_99页_6mb

2022 Article IV Consultation with Singapore Summary

Core Content

The IMF Executive Board concluded the 2022 Article IV consultation with Singapore on July 15, 2022, following discussions with Singapore officials from May 9–20, 2022. The consultation assessed the country's economic recovery, policy responses, and outlook in the post-pandemic context. The report includes a Staff Report, a Press Release, and a Statement by the Executive Director for Singapore.

Key Economic Developments

• Economic Recovery: Singapore experienced a strong but uneven recovery from the pandemic. Real GDP growth reached 7.6% in 2021, surpassing pre-COVID levels, making it one of the top-performing advanced economies. However, tourism, consumer-facing, and construction sectors remained below pre-pandemic levels.
• Inflation: Headline inflation rose to 5.4% in April 2022, driven by private transport and housing costs. MAS core inflation reached 3.3%, mainly due to global food and energy price increases. Inflation expectations remain well-anchored.
• Unemployment: The unemployment rate declined from 3.6% in October 2020 to 2.2% in March 2022, nearing pre-pandemic levels.
• External Sector: The current account surplus reached 18.1% of GDP in 2021, supported by robust exports. However, the surplus is expected to decline to 13.2% in 2022 due to rising domestic demand.
• Fiscal Position: The central government finances showed a primary balance of -7.6% of GDP in 2021, with net lending/borrowing at -1.9%. The fiscal buffer is substantial, and fiscal policy is expected to be the first line of defense in case of downside risks.
• Monetary Policy: The MAS adopted a tighter monetary policy stance, increasing interest rates and adjusting the S$NEER policy band. The 3-month S$ SIBOR rate and SORA rose above 1% by mid-2022.
• Financial Sector: The banking system remains healthy, with regulatory capital to risk-weighted assets at 16.5% in 2022Q1, well above the 10% minimum. Non-performing loans (NPLs) remained low at 1.4% of total non-bank loans. The non-bank financial sector continues to perform well, with AUM at $3.5 trillion in 2020.

Main Policy Recommendations

• Fiscal Policy: A prudent fiscal stance combined with targeted and temporary support for vulnerable households, workers, and firms is recommended to limit inflationary pressures and facilitate a broader recovery.
• Monetary Policy: The monetary policy should remain data-dependent and tighten further if inflationary pressures persist.
• Macroprudential Policy: The tight macroprudential stance should be maintained and possibly tightened to support housing market stability and prevent systemic financial risks.
• Financial Sector Supervision: Authorities should remain vigilant about financial conditions and avoid premature withdrawal of support schemes, which could increase corporate stress, especially for SMEs.
• Long-Term Priorities: Singapore is pivoting to post-pandemic and long-term priorities, including climate change, digital transformation, and economic inclusivity.

Key Risks and Outlook

• Downside Risks: The outlook is subject to significant uncertainty, with risks tilted to the downside due to the war in Ukraine, China's growth slowdown, monetary policy normalization in advanced economies, and the emergence of vaccine-resistant variants.
• Growth Outlook: Near-term growth is expected to remain above potential, with projected GDP growth of 3.7% in 2022 and converging to 2.5% in the medium term.
• Inflation Outlook: Headline inflation is expected to remain elevated at 4.8% in 2022, with core inflation stabilizing at 1.5% over the medium term.
• External Rebalancing: The current account surplus is projected to decline to 13.2% of GDP in 2022 and 12.6% in 2023.
• Fiscal Surplus: A slower pace of fiscal surplus accumulation may be warranted to support external rebalancing.

Supporting Data

Selected Economic and Financial Indicators (2016–2023)

• Nominal GDP: $396.9 billion in 2021
• Population: 5.5 million
• GDP per capita: $72,766
• Main exports: Machinery & transport equipment (61.6%), chemical products (15.5%), and miscellaneous manufactured articles (9.9%)
• Top export destinations: China (14.8%), Hong Kong SAR (13.1%), USA (8.4%)

Projections

• GDP growth: 3.7% in 2022, 2.6% in 2023
• Unemployment rate: Expected to remain at 2.2% in 2022
• Net lending/borrowing: 1.0% in 2022, 1.4% in 2023
• Current account surplus: 13.2% in 2022, 12.6% in 2023

Conclusion

The IMF commended Singapore for its effective pandemic management, swift vaccination rollout, and decisive policy support, which enabled a robust economic recovery. However, the recovery remains uneven, and downside risks are notable. The Executive Board recommended calibrated fiscal and monetary policies to manage inflationary pressures and support a broad-based recovery, while also encouraging continued progress in climate change, digital transformation, and economic inclusivity initiatives.

Key Documents

• Press Release: Summarizes the Executive Board's views on the consultation.
• Staff Report: Provides detailed analysis of Singapore's economic developments, policies, and outlook.
• Statement by the Executive Director: Reflects the IMF's perspective on Singapore's economic performance and policy responses.

Additional Notes

• The IMF's transparency policy allows for deletion of market-sensitive information and avoidance of premature disclosure of policy intentions.
• Copies of the report are available from the IMF Publication Services at a price of $18.00 per printed copy.
• Data used in the report is as of May 25, 2022, unless otherwise noted.