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Singapore Country Risk Report Q2 2016

  • February 2016
  • -
  • Business Monitor International
  • -
  • 41 pages

Core Views

The ruling People's Action Party (PAP) capitalised on positive sentimentamid Singapore's 50th anniversary to put in an extremely strongperformance in September's parliamentary elections, capturing69.9% of the popular vote. However, we expect the party to broadlyretain its policy strategy adopted in 2011, as its more consultativeapproach to governance appears to have paid significant dividends.Singapore's ongoing restructuring drive continues, with the PAPpushing ahead with stricter foreign labour rules despite an increasinglytight labour market. We believe that the tight labour market isacting as a significant headwind to real GDP growth, but do not seethe PAP easing measures in any significant way despite its landslidevictory in September's parliamentary elections.Major Forecast ChangesFollowing a deceleration in real GDP growth to 2.2% in 2015, webelieve that the economy will cool further to a 1.9% rate of expansionin 2016. Singapore's labour-intensive manufacturing industry is losingcompetitiveness as a result of an extremely tight labour market;along with a difficult external environment, this will cap growth overthe near-term.

Table Of Contents

Singapore Country Risk Report Q2 2016
Executive Summary 5
Core Views5
Major Forecast Changes5
Key Risks5
Chapter 1: Economic Outlook 7
SWOT Analysis 7
BMI Economic Risk Index 7
Economic Growth Outlook 8
SGD, GDP To Falter As China Weighs8
Singapore's considerable exposure to the Chinese economy will weigh on its growth prospects over the next two years, and we have
downgraded the city-state's real GDP growth forecast for 2016 and 2017 to 19% and 22% respectively Meanwhile, the Singapore
dollar will remain under pressure as the Chinese yuan depreciates and the MAS looks to ease its currency policy in April, taking the unit
to SGD150/USD by the end of 2016
GDP By Expenditure Outlook 9
TABLE: GDP GROWTH FORECASTS10
TABLE: PRIVATE CONSUMPTION FORECASTS10
TABLE: GOVERNMENT CONSUMPTION FORECASTS10
TABLE: FIXED INVESTMENT FORECASTS10
TABLE: NET EXPORTS FORECASTS10
Fiscal Policy And Public Debt Outlook 11
Fiscal Accounts To Return To Surplus11
The Singapore government's fiscal accounts will return to surplus in FY2016/17 following a one-off primary deficit (estimated at 05% of
GDP), and we forecast a modest surplus equivalent to 02% of GDP next year
Structural Fiscal Position 11
TABLE: SINGAPORE GOVERNMENT REVENUE AND EXPENDITURE12
External Trade And Investment Outlook 12
Trade Prospects Remain Downbeat For 201612
Singapore continues to muddle through a period of difficult trade prospects, as reflected by a fifth straight month of contraction in NODX
(down 73% y-o-y in November) While poor external demand conditions, along with the country's ongoing economic restructuring
drive, will continue to weigh on trade growth over the coming year, we note that the city-state will retain a strong, high value-added
manufacturing sector over the long term as a result of strong investment and RandD commitments
Outlook On External Position 14
TABLE: SINGAPORE EXPORTS14
TABLE: SINGAPORE IMPORTS14
TABLE: CAPITAL and FINANCIAL ACCOUNT BALANCE 15
Monetary Policy 16
MAS Set To Ease Further In April16
The MAS is set to ease its Singapore dollar policy further in April, amid a backdrop of consistent consumer price deflation, poor export
growth, falling industrial production and middling economic growth We believe that the MAS is most likely to opt for a re-centering of the
currency's band downwards, which will be tantamount to a one-off depreciation versus its trade-weighted peers
Monetary Policy Framework 17
Chapter 2: 10-Year Forecast 19
The Singaporean Economy To 2025 19
Solid Growth Trajectory To 202519
We are fairly upbeat on Singapore's longer-term growth prospects to 2024, forecasting real GDP to expand at an average rate of 29
%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 and the city-state's strategic location in Asia
TABLE: LONG-TERM MACROECONOMIC FORECASTS19
Chapter 3: Political Outlook 23
SWOT Analysis 23
BMI Political Risk Index 23
Domestic Politics 24
PAP Will Continue To Evolve Even If The Political System Doesn't24
The ruling PAP's trouncing of the opposition in September 2015's parliamentary elections was not a fluke, and instead reflected the
confluence of effective policymaking, political maneuvering, and advantageous timing Singapore effectively remains a one-party state,
but the PAP's significant policy shift between 2011 and 2015 proves that the feedback mechanism between the party and the electorate
is nevertheless highly efficient
TABLE: POLITICAL OVERVIEW 24
Long-Term Political Outlook 25
Political Liberalisation Likely To Be Slow Over Next Decade25
Singapore faces very limited political risks in the near term and we expect the ruling PAP to retain its monopoly on power through the
next two election cycles at a minimum However, over the longer term, the city-state may come under greater pressure from its citizens
to become a more vibrant democracy and foster credible opposition parties, and for this reason the PAP will retain its recent shift
towards a more consultative policy-making process
Chapter 4: Operational Risk 29
SWOT Analysis 29
Operational Risk Index 29
Operational Risk 30
TABLE: OPERATIONAL RISK 30
Trade Procedures And Governance 31
TABLE: IMPORT AND EXPORT DOCUMENTS 31
TABLE: TRADE PROCEDURES BREAKDOWN 31
TABLE: ASIA - TRADE PROCEDURES AND GOVERNANCE RISK 32
Vulnerability To Crime 33
Chapter 5: BMI Global Macro Outlook 37
Global Macro Outlook 37
Downside Risks Gather Momentum37
TABLE: GLOBAL ASSUMPTIONS 37
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % 38
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, % 38
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % 39
TABLE: MACROECONOMIC DATA and FORECASTS41

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