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IMF staff completes 2021 Article IV Mission to Singapore

WASHINGTON, USA – An International Monetary Fund (IMF) team led by Nada Choueiri conducted discussions via virtual meetings for the 2021 Article IV Consultation with Singapore during April 27-May 11, 2021. At the conclusion of the virtual discussions, Choueiri issued the following statement:

“Singapore entered the pandemic with sizable buffers and robust policy frameworks. The economic impact of the pandemic has been severe, but the economy is recovering. Real GDP contracted by 5.4 percent in 2020, reflecting a record contraction in the first half of 2020. Inflation declined to negative 0.2 percent in 2020, and unemployment peaked at 3.5 percent in the third quarter of the year. The authorities have responded appropriately with a bold, comprehensive, and coordinated policy response that protected lives and livelihoods, and stabilized domestic financial conditions. This response has helped financial markets stabilize and employment recover, with growth returning to positive territory before end-2020.

“The outlook is for a continued recovery, with real GDP projected to expand by 6 percent in 2021, as activity accelerates in the second half of the year on the back of wider vaccine availability. Inflation is expected to pick up as domestic demand recovers but is likely to remain contained given continued slack in the economy. The current account surplus is projected to decline as the recovery in domestic demand drives up imports, even as exports continue to rise alongside growing external demand.

“The uncertainty surrounding the outlook is larger than usual, but risks are balanced. As a financial and trading hub, Singapore is exposed to global financial shocks and threats to globalization and trade. Near term developments also critically depend on the path of the pandemic, which is hard to predict. An intensification of the pandemic could derail the recovery. On the upside, a faster-than anticipated global vaccine rollout and pandemic containment could accelerate the recovery.

“As the recovery proceeds, the authorities’ shift from broad emergency relief to more targeted fiscal support in 2021, combined with skills upgrades and job creation initiatives to facilitate resource reallocation across sectors, is welcome. In view of the substantial uncertainty, targeted policy support should remain in place until the recovery is firmly entrenched. Should downside risks materialize, Singapore has ample fiscal space to deploy additional policy support and fiscal policy should continue to play the role of first line of defense. The authorities’ plans to fund new major long-term infrastructure projects through borrowing under a proposed Significant Infrastructure Government Loan Act (SINGA) is also welcome.

“The accommodative monetary policy stance is appropriate. The Monetary Authority of Singapore (MAS) has maintained monetary policy on hold since the April 2020 policy easing, in the face of weak inflation and to support the recovery. Monetary policy should continue to be data-dependent. With a negative output gap and inflationary pressures still muted, monetary policy should remain accommodative until the recovery is firmly entrenched.

“The banking sector has weathered the pandemic well helped by MAS liquidity and credit support measures. The government has provided adequate, temporary, and increasingly targeted support to corporates. As the pandemic evolves, financial support measures should remain time-bound and targeted to adversely impacted sectors. The authorities have taken welcome temporary measures to amend the insolvency framework, including by simplifying insolvency procedures for small companies, which will help private sector restructuring.

“The IMF team welcomes the authorities’ concerted efforts to transition towards a smarter, greener, and more inclusive economy post-pandemic. The authorities’ actions in these areas include initiatives to accelerate digitalization and innovation to boost productivity; investment in climate-resilient infrastructure to prepare for a resilient and prosperous future; and intensified training and re-skilling to mitigate disruptions from technological innovation and population aging.

“Singapore plays a leading role in regional and global cooperation, including by supporting the development of economic policy capacity in the region. The IMF team expresses its gratitude to the authorities for their openness and constructive discussions in the virtual meetings, as well as for the logistical support.”



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