Press Release No. 22/165

IMF Staff Completes 2022 Article IV Mission with Singapore

May 24, 2022

• Singapore has recovered sharply from the COVID-19 pandemic thanks to the authorities’ decisive policy response, impressive vaccine rollout, and the country’s strong economic fundamentals. The recovery nevertheless has been uneven across sectors.
• The ongoing normalization of policies is appropriate and timely. The tighter fiscal stance in the FY 2022 Budget, combined with targeted assistance to vulnerable households and firms, will facilitate a broadening of the recovery. The tighter monetary stance will help prevent inflationary pressures from becoming entrenched. Should downside risks materialize, Singapore has ample fiscal space to deploy additional targeted support as a first line of defense.
• The IMF team welcomes the authorities’ accelerated efforts to transition towards a greener, digital, and more inclusive economy.

Washington, DC: An International Monetary Fund (IMF) team, led by Mr. Lamin Leigh, conducted discussions for the 2022 Article IV Consultation with Singapore during May 9-May 20, 2022. At the conclusion of the discussions, Mr. Leigh issued the following statement:

“Singapore’s recovery is one of the strongest among advanced economies with overall activity at end-2021 having surpassed pre-COVID levels. Real GDP growth reached 7.6 percent in 2021, underpinned primarily by a strong rebound in external demand. However, the consumer-facing services and construction sectors remained below pre-pandemic levels. Inflation has risen rapidly due to higher global food and energy prices, as well as private transport, housing prices, and to a tighter labor market.

“The outlook in Singapore is for a continued and broader recovery across sectors. Growth in 2022 is projected at about 4 percent driven by pent-up demand as the economy reopens. Headline inflation is expected to remain elevated at about 4.8 percent in 2022, driven by rising domestic cost pressures, and exacerbated by external factors such as the war in Ukraine’s impact on commodity prices and tight supply conditions . Downside risks and significant uncertainty cloud the recovery outlook, notably the war in Ukraine, China’s growth slowdown, monetary policy normalization in advanced economies, and the risk of vaccine-resistant new COVID-19 variants emerging.

“The authorities’ prudent normalization of fiscal policy in the FY2022 budget, featuring continued targeted support to sectors most affected by the pandemic, is in line with the strong yet uneven recovery. Singapore has ample fiscal space to deploy additional targeted support if downside risks materialize. Going forward, Singapore is well-positioned to absorb rising fiscal pressures to address medium- and long-term challenges including those arising from the rapidly ageing population and from climate-change risks.

“The Monetary Authority of Singapore (MAS)’s decisive shift to a tighter monetary policy stance, following three rounds of tightening since October 2021, is most welcome. Going forward, and given the risk of rising inflation, monetary policy decisions should remain data dependent, with a continued focus on preserving medium-term price stability. If higher inflation turns out to be more persistent than currently envisaged, particularly if higher price expectations become entrenched, further tightening of monetary policy will be warranted.

“The financial sector continues to be in a position of strength, preserving Singapore’s role as an important regional financial hub. Following the withdrawal of industry-wide financial sector support measures, continued targeted support to sectors in need and careful monitoring of corporate debt risks, particularly among vulnerable smaller firms, is welcome. Along with MAS’ appropriately tighter macroprudential stance to cool buoyant private residential property markets, financial stability risks have been kept at bay.

“The IMF team welcomes ongoing plans to accelerate digital adoption and innovation, particularly in the financial sector, climate-resilient infrastructure investment, climate mitigation goals, and resource reallocation towards high-growth sectors and more sustainable activities, which will support medium-term economic growth.

“The IMF team would like to express its gratitude to the authorities for their constructive engagement and policy dialogue. The IMF team will prepare a Staff Report and expects to present it to the Executive Board of the IMF in July 2022.”