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Singapore Country Risk Report Q1 2016

Singapore Country Risk Report Q1 2016

Core Views

The ruling People's Action Party (PAP) capitalised on positive sentiment amid Singapore's 50th anniversary to put in an extremely strong performance in September's parliamentary elections, capturing 69.9% of the popular vote. However, we expect the party to broadly retain its policy strategy adopted in 2011, as its more consultative approach to governance appears to have paid significant dividends.

Singapore's ongoing restructuring drive continues, with the ruling PAP pushing ahead with stricter foreign labour rules despite an increasingly tight labour market. We believe that the tight labour market is acting as a significant headwind to real GDP growth, but do not see the ruling PAP easing measures in any significant way despite its landslide victory in September's parliamentary elections.

Major Forecast Changes

Following a deceleration in real GDP growth to 2.9% in 2014, we believe that the economy will cool further to a 2.2% rate of expansion in 2015. Singapore's labour-intensive manufacturing industry is losing competitiveness as a result of an extremely tight labour market, and along with a difficult external environment, this will cap growth over the near term.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
PAP's Commanding Position Entails Policy Continuity
The PAP's landslide victory in September's general election will allow the party to stay the course with its broad policy framework
adopted in 2011.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Political Liberalisation Likely To Be Slow Over Next Decade
Singapore faces very limited political risks in the near term and we expect the ruling People's Action Party (PAP) to retain its monopoly
on power through the next two election cycles at a minimum.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
GDP, SGD To Remain Under Pressure Into 2016
Singapore's economy is treading water amidst domestic economic restructuring and poor external demand conditions, and we see little
prospect for a significant pick-up over the coming quarters. As such, we have downgraded our real GDP forecasts for 2015 and 2016 to
2.2% and 2.5%, respectively, from 2.5% and 3.2% previously.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
Fiscal Policy And Public Debt Outlook
PAP's Return Signals Consistent Fiscal Programme
The comfortable return to power for Singapore's ruling People's Action Party will guarantee another term of prudent fiscal policymaking,
and we expect to see balanced budgets erring on the side of surplus following FY2015/16's election year deficit. Key spending
measures will continue to focus on support for beleaguered small- and medium-sized businesses and low-income citizens, while
additional revenue streams will eventually be added to support a broader social safety net.
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Structural Fiscal Position
Monetary Policy
MAS To Maintain Dovish Bent Heading Into 2016
Following the Monetary Authority of Singapore's reduction to the Singapore dollar's appreciatory slope in October, we believe that the
central bank has further room to ease given Singapore's modest inflation and growth outlook.
Monetary Policy Framework
Banking Sector Update
Loan Growth To Remain Subdued, But Margins On The Rise
Singapore's loan growth will remain subdued over the coming quarters as the property market continues to act as a drag on the
extension of new credit.
Currency Forecast
SGD Set For Further Weakness Through 2016
We remain bearish on the Singapore dollar's prospects over the next 12 months, and expect the currency to weaken to SGD1.4800/
USD by the end of 2016, Continued uncertainty regarding the US Federal Reserve's interest rate policy, along with a dovish Monetary
Authority of Singapore, will undermine the SGD over the coming year.
TABLE: BMI CURRENCY FORECAST
Chapter 3: 10-Year Forecast
The Singaporean Economy To 2024
Solid Growth Trajectory To 2024
We are fairly upbeat on Singapore's longer-term growth prospects to 2024, forecasting real GDP to expand at an average rate of 3.1
%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 FORECASTS
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
TABLE: OPERATIONAL RISK
Education
TABLE: ASIA - EDUCATION RISK
Government Intervention
TABLE: GRADUATES OF TERTIARY EDUCATION
TABLE: ASIA - GOVERNMENT INTERVENTION RISK
TABLE: RESIDENT INCOME TAX RATE
Chapter 5: BMI Global Macro Outlook
Global Outlook
Exit The Dragon
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %

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