IMF Executive Board Concludes 2022 Article IV Consultation with Singapore
July 21, 2022
Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Singapore.
Singapore’s skillful containment measures, effective vaccination campaign and decisive policy support helped the economy to recover impressively. In 2021, real GDP growth reached 7.6 percent and overall activity surpassed pre-COVID levels, making Singapore one of the top performing advanced economies. However, the recovery has been uneven with tourism-related, consumer-facing, and construction sectors remaining below pre-pandemic levels. The labor market is recovering from the pandemic, albeit with some heterogeneity reflecting the uneven recovery. Overall unemployment declined from its peak of 3.6 percent in October 2020 to about the pre-pandemic level of 2.2 percent in March 2022. Inflation has risen rapidly and reached 5.4 percent in April 2022, mostly reflecting higher costs of private transport and housing. The external sector has continued to perform well, supported by robust exports, with the current account surplus reaching 18.1 percent of GDP in 2021.
Growth is expected to remain above potential in the near term and broaden across sectors, supported by widespread vaccinations and pent-up demand as the economy reopens. Staff projects a GDP growth of 3.7 percent for 2022. 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. With the recovery in domestic demand, the current account surplus is expected to decline to 13.2 percent of GDP in 2022. Over the medium term, growth should converge to 2.5 percent with the current account surplus declining and inflation stabilizing at 1.5 percent. The outlook is subject to significant uncertainty and risks are titled to the downside, stemming mostly from the war in Ukraine and the related sanctions, China’s growth slowdown, monetary policy normalization in advanced economies, and the risk of vaccine-resistant new COVID-19 variants emerging.
Executive Board Assessment [2]
Executive Directors commended the authorities for their effective management of the pandemic, swift vaccination rollout and decisive policy support, which led to an impressive economic recovery. Directors noted, however, that the recovery has been uneven across sectors. Furthermore, downside risks to the outlook remain significant, including increasing economic uncertainties, tightening global financial conditions, and inflationary pressures amplified by the war in Ukraine. In this context, Directors considered that macroeconomic policies should focus on calibrating the pace of normalization to facilitate a broader recovery while managing price pressures and downside risks.
Directors agreed that a prudent fiscal stance combined with targeted and temporary assistance to vulnerable households, workers, and firms would strike the right balance in the current uncertain environment. Should downside risks materialize, Directors recommended that fiscal policy be the first line of defense.
Directors observed that Singapore’s external position remained substantially stronger than warranted by fundamentals in 2021, although a number of Directors noted the uncertainties relating to the external balance assessment. Directors concurred that Singapore is well-positioned to withstand medium- and long-term challenges such as higher projected spending related to aging, climate change, public housing and infrastructure needs. While planned revenue mobilization will help meet a part of the financing need, a slower pace of fiscal surplus accumulation may be warranted and would also help external rebalancing.
Directors supported the tighter monetary policy stance, given upside risks to inflation. They agreed that monetary policy should continue to be data dependent and encouraged the authorities to remain vigilant towards price developments and to take further action if higher inflation becomes more persistent than currently envisaged.
Directors agreed that the financial sector remains healthy and welcomed the authorities’ continued monitoring of risks. They concurred that the macroprudential stance has been appropriately tightened and further actions might be needed should financial risks continue to grow. Directors welcomed the authorities’ plans to ramp up housing supply, which would complement the tighter macroprudential stance in supporting the stabilization of the residential real estate prices. They took positive note of the progress in implementing the 2019 FSSA recommendations and encouraged continued enhancement of the AML/CFT framework.
Directors welcomed the authorities’ pivot to post-pandemic and longer-term policy priorities by accelerating transformation towards a greener, digital, and more inclusive economy. They encouraged continuous progress in the authorities’ ambitious strategy on climate change, as well as in their digitalization and inclusion initiatives.
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Table 1. Singapore: Selected Economic and Financial Indicators, 2016–23 |
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Nominal GDP (2021): US$396.9 billion |
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Population (2021): 5.5 million |
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GDP per capita (2021): US$72,766 |
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Main goods exports (2021, percent of total non-oil goods exports): machinery & transport equip. (61.6 percent); chemical products (15.5 percent); and misc. manufactured articles (9.9 percent). |
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Top three destinations for goods exports (2021, percent of gross goods exports): China (14.8 percent); Hong Kong SAR (13.1 percent); and USA (8.4 percent). |
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Projections |
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2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
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Growth (percentage change) |
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Real GDP |
3.6 |
4.7 |
3.7 |
1.1 |
-4.1 |
7.6 |
3.7 |
2.6 |
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Total domestic demand 1/ |
5.5 |
6.1 |
0.9 |
2.0 |
-9.9 |
8.9 |
3.8 |
2.3 |
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Final domestic demand 1/ |
2.3 |
4.0 |
0.5 |
2.7 |
-9.6 |
9.4 |
3.9 |
2.3 |
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Consumption |
3.3 |
3.2 |
3.7 |
3.2 |
-7.2 |
4.5 |
3.6 |
3.6 |
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Private consumption |
3.2 |
3.2 |
4.0 |
3.2 |
-12.9 |
4.5 |
4.5 |
3.9 |
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Gross capital formation 1/ |
9.6 |
11.0 |
-3.7 |
-0.3 |
-14.7 |
17.7 |
4.3 |
0.1 |
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Gross fixed investment |
0.6 |
5.3 |
-5.1 |
1.7 |
-14.2 |
19.6 |
4.5 |
0.1 |
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Change in inventories (contribution to GDP growth, percentage points) 1/ |
2.3 |
1.6 |
0.3 |
-0.5 |
-0.4 |
-0.2 |
0.0 |
0.0 |
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Net exports (contribution to GDP growth, percentage points) 1/ |
-0.2 |
0.9 |
2.5 |
0.5 |
3.1 |
0.9 |
1.2 |
1.0 |
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Saving and investment (percent of GDP) |
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Gross national saving |
44.1 |
44.6 |
39.9 |
39.1 |
39.3 |
42.5 |
40.0 |
38.3 |
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Gross domestic investment |
26.5 |
27.3 |
24.8 |
24.7 |
22.5 |
24.4 |
26.8 |
25.7 |
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Inflation and unemployment (period average, percent) |
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CPI inflation |
-0.5 |
0.6 |
0.4 |
0.6 |
-0.2 |
2.3 |
4.8 |
2.5 |
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CPI inflation, excluding food and energy 2/ |
-0.5 |
-0.7 |
-0.1 |
0.4 |
-0.3 |
2.4 |
2.8 |
2.0 |
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MAS core inflation 2/ |
0.9 |
1.5 |
1.7 |
1.0 |
-0.2 |
0.9 |
3.0 |
2.0 |
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Unemployment rate |
2.1 |
2.2 |
2.1 |
2.3 |
3.0 |
2.7 |
2.2 |
2.2 |
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Central government finances (percent of GDP) 3/ |
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Revenue |
18.3 |
18.8 |
17.9 |
17.8 |
17.8 |
18.3 |
17.8 |
16.9 |
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Expenditure |
15.1 |
14.0 |
13.8 |
14.0 |
22.1 |
20.2 |
16.8 |
15.5 |
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Net lending/borrowing |
3.2 |
4.8 |
4.1 |
3.8 |
-4.2 |
-1.9 |
1.0 |
1.4 |
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Net lending/borrowing, excluding nonproduced assets |
0.4 |
1.7 |
1.1 |
1.4 |
-5.9 |
-3.8 |
-1.0 |
-0.5 |
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Primary balance 4/ |
-2.6 |
-1.5 |
-2.0 |
-1.9 |
-9.6 |
-7.6 |
-4.7 |
-3.2 |
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Money and credit (end of period, percent change) 5/ |
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Broad money (M2) |
8.4 |
4.2 |
5.1 |
4.4 |
10.7 |
9.7 |
8.9 |
5.1 |
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Credit to private sector |
5.5 |
3.3 |
4.8 |
3.0 |
1.4 |
6.2 |
3.7 |
2.6 |
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Three-month S$ SIBOR rate (percent) |
1.0 |
1.5 |
1.9 |
1.8 |
0.4 |
0.4 |
… |
… |
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Balance of payments (US$ billions) |
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Current account balance |
56.3 |
59.4 |
57.1 |
54.3 |
58.1 |
71.9 |
56.2 |
56.4 |
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(In percent of GDP) |
17.6 |
17.3 |
15.2 |
14.5 |
16.8 |
18.1 |
13.2 |
12.6 |
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Goods balance |
89.9 |
101.0 |
104.1 |
98.1 |
103.6 |
118.2 |
100.9 |
111.2 |
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Exports, f.o.b. |
373.2 |
417.2 |
460.6 |
442.6 |
417.8 |
503.9 |
610.1 |
647.7 |
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Imports, f.o.b. |
-283.3 |
-316.2 |
-356.4 |
-344.5 |
-314.1 |
-385.7 |
-509.1 |
-536.5 |
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Financial account balance 6/ |
57.5 |
32.5 |
44.5 |
62.5 |
-15.8 |
8.2 |
6.1 |
4.9 |
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Overall balance 6/ |
-1.8 |
27.4 |
12.5 |
-8.4 |
74.9 |
66.2 |
50.1 |
51.4 |
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Gross official reserves (US$ billions) |
246.6 |
279.9 |
287.7 |
279.5 |
362.3 |
417.9 |
460.5 |
519.0 |
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(In months of imports) 7/ |
5.9 |
6.0 |
6.3 |
6.5 |
7.1 |
6.3 |
6.6 |
7.0 |
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Singapore dollar/U.S. dollar exchange rate (period average) |
1.38 |
1.38 |
1.35 |
1.36 |
1.38 |
1.34 |
… |
… |
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Nominal effective exchange rate (percentage change) 8/ |
-1.0 |
-1.0 |
0.5 |
1.5 |
-2.4 |
0.4 |
… |
… |
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Real effective exchange rate (percentage change) 8/ |
-6.0 |
-9.4 |
-5.9 |
4.6 |
-25.1 |
0.4 |
… |
… |
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Memorandum items: |
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Nominal GDP (in billions of Singapore Dollars) |
440.5 |
473.9 |
508.5 |
512.2 |
476.4 |
533.4 |
581.0 |
610.9 |
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Growth (%) |
4.0 |
7.6 |
7.3 |
0.7 |
-7.0 |
12.0 |
8.9 |
5.1 |
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Sources: Data provided by the Singapore authorities; and IMF staff estimates and projections. |
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Note: Data and forecasts as of May 24, 2022 |
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1/ Approximation based on available data. |
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2/ IMF staff estimates, showing projections from 2021. MAS core inflation excludes the costs of accommodation and private transport. |
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3/ IMF staff estimates on a calendar year basis following GFSM 2014. |
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4/ Net lending/borrowing excluding net investment return contribution (NIRC). |
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5/ Data reporting by financial institutions changed since July 2022 after two major changes in MAS’ banking sector regulatory framework took effect, creating a break in the broad money and credit to private sector series. |
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6/ Following the BPM6 sign convention, a positive entry implies net outflows. |
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7/ In months of following year's imports of goods and services. |
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8/ Increase is an appreciation. |
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[1] 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.
[2] 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 .
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