On July 10, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Singapore.
Singapore’s macroeconomic performance has been impressive. GDP per capita more than doubled in the last twenty years and income inequality has been declining since the GFC.
Singapore’s economic activity moderated in 2018. After a surge in domestic demand in 2017, growth tapered to 3.1 percent in 2018. While consumption remained resilient, investment declined sharply, and the main drivers of growth shifted back to external demand. Growth decelerated further to 1.2 percent in 2019Q1 compared to the previous year, as manufacturing decelerated. Nonetheless, labor market conditions continued to improve in 2018: unemployment declined, employment expanded, and real wages grew. Inflationary pressures remained modest in 2018. MAS core inflation slowed slightly to 1.6 percent on year-on-year basis in 2019Q1, largely reflecting the decline in electricity prices and lower global oil prices. The current account surplus declined in 2019Q1 from a year ago but remains large as a share of GDP.
With less support from external demand, growth is expected to slow to 2 percent in 2019. Given global trade tensions, support from external sectors is expected to fall and growth drivers are projected to shift back to domestic demand. Investment is expected to pick up with the push for digitalization and new industry-related projects. MAS core inflation is expected to slightly edge down as the output gap closes, but headline inflation is expected to rise as the drag from accommodation and private road transport costs recede. Over the medium term, growth should stabilize around 2½ percent, increasingly driven by modern services alongside other trade-related sectors. Risks to the outlook are tilted to the downside and mainly stem from external sources, including a tightening of global financial conditions, escalation of sustained trade tensions, and deceleration of global growth.
Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.