SINGAPORE, April 18, 2019 – Singapore’s structural transformation efforts to boost productivity and innovation remain firmly on track, while economic growth is expected to moderate going forward due to softer global growth and easing global tech cycle amid the U.S.-China trade conflict. This is according to the 2018 Annual Consultation Report on Singapore published by the ASEAN+3 Macroeconomic Research Office (AMRO) today. The report was prepared on the basis of AMRO’s Annual Consultation Visit to the country in November/December 2018 and data availability as of February 25, 2019.

Following a strong expansion in 2017 and the first half of 2018, Singapore’s growth is expected to moderate to 2.5 percent in 2019 as the cyclical uplift from the global tech rebound is fading in tandem with lower growth in its key final demand markets. Nevertheless, the labour market remains tight, as indicated by higher wage growth and the stable unemployment rate.

The on-going U.S.-China trade conflict is the most important downside risk to Singapore’s economy. Pockets of domestic vulnerabilities exist, arising from the smaller firms and lower income households that are susceptible to weaker economic conditions and rising interest rates.

Authorities should continue to monitor developments in the U.S.-China trade conflict closely. Fiscal policy can play a leading role in mitigating the impact of the trade conflict on the economy. For vulnerable sectors, the government should provide targeted and time-bound financial assistance, complemented by advisory services about potential trade issues. More broad-based measures such as extending the Corporate Income Tax rebates, promoting employment and retraining the workforce, as well as frontloading of infrastructure investments can be considered, if the trade conflict were to escalate, leading to a sharper economic downturn.

The normalization of monetary policy in response to the steady improvements in the labor market, strong economic growth, and rising inflation, has been in line with the objective of maintaining price stability in the medium-term. However, should the trade conflict escalate further, leading to a deterioration in the external environment and a significant slowdown in the domestic economy, the Monetary Authority of Singapore should consider relaxing the monetary policy stance to support the economy.

On social welfare, the authorities’ plan to enhance social safety nets to improve welfare and mitigate the impact of adverse shocks on vulnerable segments of the population, particularly the elderly and older workers, are welcomed and continued efforts are encouraged.

In July 2018, the authorities had increased the Additional Buyer’s Stamp Duty rates and tightened the Loan-to-Value ratio to prevent private residential property prices from overshooting and keep property prices in line with economic fundamentals. The planned land sales for private residential housing in the first half of 2019 have also been reduced, in anticipation of a large supply next year. For public housing, the supply of new Build-To-Order flats in 2019 will be kept at a steady level. Going forward, the authorities should continue to take into account the pace of population growth and household formation, in considering adjustments to the overall housing supply, to ensure stability in the property market.

The authorities are committed to restructuring the country towards a high productivity and innovation-based economy. All 23 sector-specific Industry Transformation Maps have been rolled out, and the FY2018 Budget included more targeted schemes to encourage greater adoption of digital technologies and enhanced upskilling.

In the area of Fintech, the authorities have adopted regulatory sandbox approach to facilitate innovation and growth while ensuring that the overall safety and soundness of the financial system is maintained. Greater collaboration among financial institutions and Fintech firms is also being encouraged. As for cybersecurity risk, mitigation efforts have been strengthened on various fronts, such as an enhanced cyber-risk assessment framework for financial institutions and multiple platforms for information sharing domestically and internationally.

About AMRO and AMRO’s Annual Consultation Report:

The ASEAN+3 Macroeconomic Research Office (AMRO) is an international organization established to contribute towards securing macroeconomic and financial stability of the ASEAN+3 region, which include 10 members of the Association of Southeast Asian Nations (ASEAN) and China; Hong Kong, China; Japan; and Korea. AMRO’s mandate is to conduct macroeconomic surveillance, support the implementation of the regional financial arrangement, the Chiang Mai Initiative Multilateralisation (CMIM), and provide technical assistance to the members.

The Annual Consultation Report was prepared in fulfilment of AMRO’s mandate. AMRO is committed to monitoring, analyzing and reporting to its members on their macroeconomic status and financial soundness. It also helps identify relevant risks and vulnerabilities, and assists members, if requested, in the timely formulation of policy recommendations to mitigate such risks.