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Singapore Country Risk Report Q2 2016

Singapore Country Risk Report Q2 2016

Core Views

The ruling People's Action Party (PAP) capitalised on positive sentimentamid Singapore's 50th anniversary to put in an extremely strongperformance in September's parliamentary elections, capturing69.9% of the popular vote. However, we expect the party to broadlyretain its policy strategy adopted in 2011, as its more consultativeapproach to governance appears to have paid significant dividends.

Singapore's ongoing restructuring drive continues, with the PAPpushing ahead with stricter foreign labour rules despite an increasinglytight labour market. We believe that the tight labour market isacting as a significant headwind to real GDP growth, but do not seethe PAP easing measures in any significant way despite its landslidevictory in September's parliamentary elections.

Major Forecast Changes

Following a deceleration in real GDP growth to 2.2% in 2015, webelieve that the economy will cool further to a 1.9% rate of expansionin 2016. Singapore's labour-intensive manufacturing industry is losingcompetitiveness as a result of an extremely tight labour market;along with a difficult external environment, this will cap growth overthe near-term.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
SGD, GDP To Falter As China Weighs
Singapore's considerable exposure to the Chinese economy will weigh on its growth prospects over the next two years, and we have
downgraded the city-state's real GDP growth forecast for 2016 and 2017 to 1.9% and 2.2% respectively. Meanwhile, the Singapore
dollar will remain under pressure as the Chinese yuan depreciates and the MAS looks to ease its currency policy in April, taking the unit
to SGD1.50/USD by the end of 2016.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Fiscal Policy And Public Debt Outlook
Fiscal Accounts To Return To Surplus
The Singapore government's fiscal accounts will return to surplus in FY2016/17 following a one-off primary deficit (estimated at 0.5% of
GDP), and we forecast a modest surplus equivalent to 0.2% of GDP next year.
Structural Fiscal Position
TABLE: SINGAPORE GOVERNMENT REVENUE AND EXPENDITURE
External Trade And Investment Outlook
Trade Prospects Remain Downbeat For 2016
Singapore continues to muddle through a period of difficult trade prospects, as reflected by a fifth straight month of contraction in NODX
(down 7.3% y-o-y in November). While poor external demand conditions, along with the country's ongoing economic restructuring
drive, will continue to weigh on trade growth over the coming year, we note that the city-state will retain a strong, high value-added
manufacturing sector over the long term as a result of strong investment and R&D commitments.
Outlook On External Position
TABLE: SINGAPORE EXPORTS
TABLE: SINGAPORE IMPORTS
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
Monetary Policy
MAS Set To Ease Further In April
The MAS is set to ease its Singapore dollar policy further in April, amid a backdrop of consistent consumer price deflation, poor export
growth, falling industrial production and middling economic growth. We believe that the MAS is most likely to opt for a re-centering of the
currency's band downwards, which will be tantamount to a one-off depreciation versus its trade-weighted peers.
Monetary Policy Framework
Chapter 2: 10-Year Forecast
The Singaporean Economy To 2025
Solid Growth Trajectory To 2025
We are fairly upbeat on Singapore's longer-term growth prospects to 2024, forecasting real GDP to expand at an average rate of 2.9
%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 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
PAP Will Continue To Evolve Even If The Political System Doesn't
The ruling PAP's trouncing of the opposition in September 2015's parliamentary elections was not a fluke, and instead reflected the
confluence of effective policymaking, political maneuvering, and advantageous timing. Singapore effectively remains a one-party state,
but the PAP's significant policy shift between 2011 and 2015 proves that the feedback mechanism between the party and the electorate
is nevertheless highly efficient.
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 PAP to retain its monopoly on power through the
next two election cycles at a minimum. However, over the longer term, the city-state may come under greater pressure from its citizens
to become a more vibrant democracy and foster credible opposition parties, and for this reason the PAP will retain its recent shift
towards a more consultative policy-making process.
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
TABLE: OPERATIONAL RISK
Trade Procedures And Governance
TABLE: IMPORT AND EXPORT DOCUMENTS
TABLE: TRADE PROCEDURES BREAKDOWN
TABLE: ASIA – TRADE PROCEDURES AND GOVERNANCE RISK
Vulnerability To Crime
Chapter 5: BMI Global Macro Outlook
Global Macro Outlook
Downside Risks Gather Momentum
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
TABLE: MACROECONOMIC DATA & FORECASTS

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