Singapore’s GDP growth has been forecasted to slow to 2.7 percent this year from 4.8 percent last year, accompanied by weaker external demand, according to the International Monetary Fund (IMF).
The IMF noted that the outlook is clouded by “significant downside risks” — most notably, “a sharp and protracted downturn in large advanced economies and extreme financial stress spreading from the Euro area”.
However, Singapore has “sufficient policy firepower” to counter the effects of this slowdown and the external factors that contributed to it, the Washington-based organisation added.
This latest assessment from the IMF focused on five areas: the main risks, the outlook for the economy, economic rebalancing, the issue of domestic credit growth and policies for inclusive growth.
On the outlook for the economy, it explained that external demand will continue to cool this year and the electronics sector will be “particularly hard hit”. Inflation will also moderate to three percent due to softer commodity prices, lower rentals and slower growth.
The IMF further estimates that a one percentage point drop in global growth will lead to a decline of around 1.7 to 1.9 percentage points in Singapore’s GDP.
However, the IMF added that even if the city-state is affected by the slowdown, its government has sufficient capabilities via its policies to dampen the impact.
“There is sufficient fiscal space to introduce, as in 2008, a discretionary stimulus package to support employment (if necessary), help low-income families, and enhance the cash flow of firms,” it added.
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