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Singapore Business Forecast Report Q1 2015

  • November 2014
  • -
  • Business Monitor International
  • -
  • 48 pages

Core Views

Singapore's ongoing restructuring drive continues, with the ruling People's Action Party pushing ahead with stricter foreign labour rules despite an increasingly tight labour market. While we believe that the tight labour market is acting as a headwind against economic growth, we do not foresee any easing from the government in the
near future.
Singapore's real GDP growth accelerated slightly to 2.4% year-onyear (y-o-y) in Q314, but this remains below the government's forecasted range of 2.5-3.5% for 2014. We retain our below consensus real GDP growth forecast of 2.5% for 2014, and note that risks to our 3.3% growth forecast for 2015 are likely to the downside given domestic and external pressures.

Major Forecast Changes

We have adjusted our 2015 Singapore dollar average forecast down to SGD1.2500/USD from SGD1.2300/USD previously as the currency continues to experience headwinds from a strong US dollar as well as weakening currencies among its regional trading peers.

Table Of Contents

Singapore Business Forecast Report Q1 2015
Executive Summary 5
Core Views 5
Major Forecast Changes 5
Key Risks To Outlook 5
Chapter 1: Political Outlook 7
SWOT Analysis 7
BMI Political Risk Index 7
Domestic Politics 8
Competitiveness, Global Weakness To Hit Export Outlook 8
Singaporean exports have performed poorly throughout 2014, and we believe that the ongoing loss of competitiveness owing to the
city-state's extremely tight labour market will be a key headwind against a strong recovery going forward. That said, we do not expect
the People's Action Party to roll back its tighter immigration policies, as political imperatives will outweigh short-term economic growth
Table: Political Overview 8
Long-Term Political Outlook 9
Political Liberalisation Likely To Be Slow Over Next Decade 9
Singapore faces very limited political risks in the near term and we expect the ruling People's Action Party (PAP) to retain its monopoly
on power through the next two election cycles at a minimum. However, over the longer term, the city-state will come under greater
pressure from its citizens to become a more vibrant democracy and foster credible opposition parties, and PAP policy will likely shift
towards slightly more populist measures as its popularity begins to erode.
Chapter 2: Economic Outlook 13
SWOT Analysis 13
BMI Economic Risk Index 13
Economic Activity 14
MAS Stands Pat As GDP Disappoints 14
Following an expected 2.5% real GDP growth performance in 2014, we expect the Singapore economy to accelerate slightly to 3.3% in
2015. However, the country's tight labour market, along with the ongoing slowdown in China and renewed weakness in the eurozone
pose downside risks to this forecast.
Table: Economic Activity 14
Fiscal Policy 15
Long-Term Fiscal Outlook Strong Despite Headwinds 15
Singapore's fiscal position is structurally sound, and despite growing expenditure commitments over the medium term owing to an
ageing population, we do not foresee a material deterioration from the government's moderate fiscal surpluses.
Table: Fiscal Policy 15
Monetary Policy 16
AEC: Financial Services Liberalisation To Benefit Singapore 16
The creation of the AEC will make the regional commercial banking sector an attractive market opportunity due to the formidable size
of its aggregate assets vis-a-vis other Asian countries. While we expect resistance from some ASEAN countries in liberalising certain
areas of their markets to delay the full impact of the AEC, we believe there will be some progress on achieving many of the goals of a
common financial services market by 2020. With by far the most developed financial markets within the region, Singapore is uniquely
placed to benefit from the maturation of the AEC.
Table: Monetary Policy 17
Exchange Rate Policy 18
Weaker Peer Currencies A Drag On SGD 18
Despite the Singapore dollar's strength against the majority of its peers, broad USD strength has led us to downgrade our 2014 and
2015 average forecasts on the unit to SGD1.2700/USD and SGD1.25 00/USD, respectively, versus SGD1.2500/USD and SGD1.23
00/USD previously. While we expect the currency to continue to outperform the majority of its trade-weighted basket, downside risks
against the US dollar remain prescient following the conclusion of the US Federal Reserve's Quantitative Easing programme.
Table: Current Account 19
Chapter 3:10-Year Forecast 21
The Singaporean Economy To 2023 21
Solid Growth Trajectory To 2023 21
We are fairly upbeat on Singapore's longer-term growth prospects to 2023, forecasting real GDP to expand at an average rate of 3.3
%per annum. Key supporting factors will be the government's sound economic policy, a highly skilled workforce, a superior business
environment and financial services industry as well as the city-state's strategic location in Asia. Key constraints include the economy's
reliance on the external sector and Singapore's ageing demographic profile.
Table: Long-Term Macroeconomic Forecasts 21
Chapter 4: Operational Risk 25
Operational Risk Index 25
Operational Risk 26
Table: Operational Risk 26
Transport Network 27
Table: Asia Transport Network Risks 28
Economic Openness 32
Table: Economic Openness 33
Table: Top 5 Trade Partners Product Exports (USDmn) 34
Table: Top 5 Products Imported (USDmn) 35
Chapter 5: Key Sectors 37
Infrastructure 37
Table: Construction and Infrastructure Industry Data 38
Table: Construction and Infrastructure Industry Data 39
Table: Factbox - Key Milestones In Singapore's Infrastructure Masterplan 40
Oil and Gas 41
Other Key Sectors 45
Table: Pharma Sector Key Indicators 45
Table: Telecoms Sector Key Indicators 45
Table: Defence and Security Sector Key Indicators 45
Table: Food and Drink Sector Key Indicators 46
Table: Autos Sector Key Indicators 46
Table: Freight Key Indicators 46
Chapter 6: BMI Global Assumptions 47
Global Outlook 47
Reality Check: Uncertainty Reigns 47
Table: Global Assumptions 47
Table: Developed States, Real GDP GrowtH, % 48
Table: Emerging Markets, Real GDP Growth, % 49

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