Singapore Country Risk Report Q4 2018
Singapore's fourth generation leaders are showing signs of taking on a greater leadership role, boding well for the city-state's ongoing leadership succession process. We believe that the next generation is likely to face more challenges than their predecessors amid a more vocal opposition. However, Singapore's overall political outlook is likely to remain stable as the third generation leaders are unlikely to fade from the political scene.
We continue to expect Singapore's economic growth to cool over the coming quarters as the economy will continue to face headwinds from the ongoing global trade conflict, a weak construction sector, and rising interest rates.
We expect Singapore's healthy fiscal position to remain intact over the coming years, which will underpin the city-state's favourable business environment. The government is fiscally prudent and is already planning ahead to raise GST revenues over the coming years in a bid to cope with rising expenditures amid structural shifts such as an ageing population.
We expect the Monetary Authority of Singapore (MAS) to adopt a wait-and-see approach over the coming months, given that the Singapore economy continues to face mounting external uncertainty while inflationary pressures remain muted. Therefore, we believe that the central bank will keep its existing policy stance on hold during its upcoming biannual monetary policy meeting in October 2018.
The Singapore dollar's trend is correcting towards further weakness, while rising uncertainty in the global trade environment will put downside pressure on the Singapore dollar over the near-term, despite the MAS's appreciatory stance on the currency.Major Forecast Changes
We have revised our 2018 real GDP growth forecast to 3.3% (from 3.0% previously) to reflect the outperformance in H118.
We have revised our 2018 average forecast for the Singapore dollar to SGD1.36/USD (from SGD1.30/USD previously) to reflect greater headwinds to the cur-rency.
Despite Singapore's sound fundamentals, the confluence of weak external demand (led by a rapidly slowing Chinese economy) and domestic economic restruc-turing could give rise to a technical recession over the coming quarters.
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