The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Singapore on 20 July 2018.
Singapore’s economy strengthened markedly in 2017, benefiting from a synchronized global expansion and a surge in electronics exports and maintained its momentum in 2018. The strength in the externally-oriented sectors has been gradually spilling over to the rest of the economy, supporting a reduction in labor market slack and a recovery in private domestic demand.
Real GDP growth reached 4.4 percent in 2018Q1 compared to a year ago and the 2017 average of 3.6 percent.
Headline consumer price inflation turned positive in 2017 after remaining below zero for nearly two years. In the first four months of 2018, headline inflation decelerated, but the MAS core inflation was largely unchanged at 1.5 percent. The current account surplus has remained substantial and broadly unchanged, as a share of GDP, in the past few years.
Economic growth is expected to normalize toward its potential rate of about 2¾ percent, starting in 2018, while strengthening of labor market conditions should support higher inflation going forward. Macroeconomic policies have remained accommodative and are being recalibrated in response to the strength in the economy, while also being mindful of medium-term infrastructure and aging-related needs. Risks to the near-term growth are broadly balanced and stem from external sources.
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Key global downside risks include intensification of trade tensions, tighter financial conditions, and a slower-than-expected growth in major trading partners. Continued strength in global electronics trade and higher-than-expected spillover from U.S. fiscal stimulus are important upside risks. Over the medium term, a successful transition to a new growth model that aims to adopt general purpose digital technologies, strive for innovation, improve workers’ skills, and embrace a more inclusive society, should help rebalance the economy.
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