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Singapore Country Risk Report Q2 2020

Published by Fitch Solutions, Inc. Product code 177803
Published annual subscription Content info 65 Pages
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Singapore Country Risk Report Q2 2020
Published: annual subscription Content info: 65 Pages
Description

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.

Major Forecast Changes

We have revised our 2020 average currency forecast to SGD1.3850/USD from SGD1.3750/USD previously.

Key Risks

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

Table of Contents
Product Code: CFSG_20200401

Table of Contents

Executive Summary

  • Core Views
  • Major Forecast Changes
  • Key Risks
  • Country Risk Summary
  • Economic Risk Index
  • Political Risk Index
  • SWOT
  • Economic - SWOT Analysis
  • Political - SWOT Analysis
  • Economic Outlook
  • Economic Growth Outlook
  • 2020 To See Slight Economic Recovery
  • GDP By Expenditure Outlook
    • TABLE: GDP GROWTH FORECASTS
    • TABLE: PRIVATE CONSUMPTION FORECASTS
    • TABLE: GOVERNMENT CONSUMPTION FORECASTS
    • TABLE: FIXED INVESTMENT FORECASTS
    • TABLE: NET EXPORTS FORECASTS
  • Outlook On External Position
    • TABLE: TOP FIVE GOODS EXPORTS
    • TABLE: TOP FIVE GOODS IMPORTS
    • TABLE: CURRENT ACCOUNT BALANCE FORECASTS
    • TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
  • Monetary Policy
  • Coronavirus Strengthens Case For Monetary Easing In 2020
  • Monetary Policy Framework
    • TABLE: MONETARY POLICY FORECASTS
  • Fiscal Policy And Public Debt Outlook
  • Coronavirus Woes To Widen Primary Deficit In 2020
  • Structural Fiscal Position
    • TABLE: MAIN REVENUE AND EXPENDITURE SOURCES
    • TABLE: FISCAL AND PUBLIC DEBT FORECASTS
  • THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.Singapore Country Risk Q2 2020ContentsCurrency Forecast
  • Coronavirus Puts Singapore Dollar On Even Weaker 2020 Footing
    • TABLE: CURRENCY FORECAST
  • 10-Year Forecast
  • The Singaporean Economy To 2029
  • Solid Growth Trajectory To 2029
    • TABLE: LONG-TERM MACROECONOMIC FORECASTS
  • Political Outlook
  • Domestic Politics
  • Rising Nativist Sentiment Could Undermine Singapore's Business Environment
    • TABLE: POLITICAL OVERVIEW
  • Long-Term Political Outlook
  • Political Liberalisation Likely To Be Slow Over Next Decade
  • Operational Risk
    • TABLE: OPERATIONAL RISK
  • Conflict Risk
    • TABLE: MAIN ACTIVE TERRORIST GROUPS
    • TABLE: POLITICAL VIOLENCE RISK
    • TABLE: MAJOR INTERSTATE CONFLICT FLASHPOINTS
    • TABLE: MILITARY PROFILE AND DEFENCE AGREEMENTS
    • TABLE: BUSINESS RESPONSE TO CONFLICT RISK
  • Transport Network
    • TABLE: ROAD RISKS
    • TABLE: RAIL RISKS
    • TABLE: PORTS AND INLAND WATERWAY RISKS
    • TABLE: AIR TRANSPORT RISKS
  • Global Macro Outlook
  • Economic Stabilisation Continues And Inflation Picking Up Slowly
    • TABLE: GLOBAL MACROECONOMIC FORECASTS (2019-2024)
    • TABLE: DEVELOPED MARKETS - REAL GDP GROWTH, % y-o-y
    • TABLE: EMERGING MARKETS - REAL GDP GROWTH, % Y-O-Y
  • Index Tables
    • TABLE: SINGAPORE - MACROECONOMIC DATA AND FORECASTS
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