Annual Information Service
Singapore Country Risk Report Q2 2020
|Published by||Fitch Solutions, Inc.||Product code||177803|
|Published||annual subscription||Content info||65 Pages|
|Singapore Country Risk Report Q2 2020|
|Published: annual subscription||Content info: 65 Pages||
Our 2020 real GDP growth forecast remains at 1.7%, up from 0.7% growth in 2019. Manufacturing will likely continue to drag heavily on the economy in
2020, as the external environment remains highly uncertain despite the 'phase-one' trade deal. We see fixed investment remaining steady due to ongoing
public infrastructure projects and low base effects. An extended crisis in Hong Kong could bring further benefits should businesses act on contingency
plans and relocate.
We continue to expect the Monetary Authority of Singapore to maintain its easing stance in 2020. We expect the novel coronavirus (2019-nCoV) outbreak to
pose further downside risks to an economy that narrowly avoided a technical recession in 2019, which would strengthen the case for more easing to support
the economy, especially the export-oriented manufacturing sector. Meanwhile, inflation is likely to remain at near the 0.6% y-o-y average seen in 2019, given
the rough balance of rising food price pressures and a softer outlook for oil prices.
We at Fitch Solutions maintain our primary budget deficit forecast at 2.2% of GDP for 2020 but see a possible range of revision to between 2.3-2.6% of GDP
over the coming months. This is because of the downside risks to the economy posed by the coronavirus outbreak, which already has 18 confirmed cases in
Singapore as of February 3. Singapore's free and open economy will likely be negatively affected by the economic slowdown the virus is likely to cause in China,
and is exposed to further downside risk from the potential for community outbreaks to occur in other countries. A slower economy would weigh further on
revenues, while the government is likely to implement an even more expansionary budget to counteract the negative shock from the virus and both dynamics
would widen the primary deficit. We await a better understanding of the virus' transmission mechanisms before making a revision.
We at Fitch Solutions have revised our 2020 and 2021 average exchange rate forecasts to SGD1.3850/USD and SGD1.3750/USD respectively, from SGD1.3750/
USD and SGD1.3600/USD previously. The likely downside to the Singapore economy from the coronavirus outbreak in China means that the case for monetary
easing is strengthened, leading to short-term depreciatory pressures as markets price in a higher likelihood of easing. We still hold a more optimistic outlook for
2021, by which time a vaccine for the coronavirus is likely to be commercially available, which would reduce the disruption even if there are still cases around
the world. Prospects for a comprehensive and lasting resolution to the US-China trade war are also better.
We at Fitch Solutions see longer-term risks to Singapore's ability to maintain a free and open economy as growth slows along with a maturing economy and
a more protectionist political mood taking hold around the world. These risks are heightened by the nativist appeal mounted and likely to be maintained
by the opposition, which seeks to build on the strategy's success during the 2011 General Election. Even fair and judicious application of the fake news law,
Protection from Online Falsehoods and Manipulation Act or POFMA as it is formally known, could backfire in a less favourable economic environment, leading
to perceptions of a cover-up that would put open economic policies at further risk.
We have revised our 2020 average currency forecast to SGD1.3850/USD from SGD1.3750/USD previously.
The risk of a technical recession has risen in Singapore after two quarters of sluggish economic growth and which could be precipitated by a more pronounced
Chinese economic slowdown amid the outbreak of the coronavirus.
Singapore Country Risk Q2 2020fitchsolutions.com