Briefing Notes for the Launch in Singapore, March 2009
- The rate of growth dropped abruptly in Singapore, from 7.7% in 2007 to 1.2% in 2008,
the lowest since 2001.
- Exports dropped significantly towards the end of 2008: -4.3% in October (year-onyear),
-11.9% in November, -20.4% in December, and -37.8% in January 2009.
- With the exception of government consumption, domestic demand lost dynamism in
2008 compared to the year before:
- The rate of growth of gross fixed investment dropped from 19.2% in 2007 to
13.7% in 2008.
- The rate of growth in private consumption slowed down markedly from 5.2% in
2007 to 2.4% in 2008.
- But the rate of growth of government consumption increased from 2.3% in 2007
to 9.6% in 2008.
- As of the end of February, growth was forecast to drop to -2.5% in 2009.
Inflation, monetary policy and exchange rate developments
- Reflecting the dramatic increases in international commodity markets until July of 2008,
Singapore’s inflation rate increased from 2.1% in 2007 (year-on-year) to 6.5% in 2008.
- However, inflation decelerated fast towards the end of 2008, as the price of crude oil and
other commodities plunged, reaching 2.9% in January 2009.
- Given the weakening global demand for Singapore exports and easing of inflation due to
the drop in commodity prices, the Monetary Authority of Singapore announced in
October 2008 that it was shifting its monetary policy stance to a zero percent
appreciation of its target exchange rate.
- The Singapore dollar depreciated from an average of 1.4 US dollars in the first three
quarters of 2008 to an average of 1.5 US dollars in the fourth quarter of that year and the
first two months of 2009.
- Singapore held $174b in foreign exchange reserves as of the end of December 2008, up
from $163 billion a year before.
Fiscal situation and perspectives
- Singapore’s budget surplus decreased from 3.4% of the GDP in 2007 to 0.9% in 2008.
- On January 2009 the Singapore’s cabinet approved a stimulus package of S$20.5 billion
($13.7 billion, 11.5% of the GDP) which includes the following elements:
- Jobs credit scheme: cash transfers for employers to cover part of their wage bills
and avoid mass lay-offs (S$4.5 billion).
- Special risk-sharing initiative: Government guarantees to working-capital loans
(up to S$5 million) to individual firms to stimulate bank lending.
- Cut in corporate tax rate from 18% to 17%.
- Personal income tax rebates of 20% of taxes due (capped at S$2,000).
- The Government plans to draw down S$4.9 billion from previously accumulated
reserves to finance the jobs credit programme and the special-risk sharing
initiative programmes; it will also tap reserves held by the Monetary Authority of
Singapore and the Government of Singapore Investment Corporation.