Briefing Notes for the Launch in Singapore, 6 May 2010
Economic growth and prospects
- In the Asia Pacific region, Singapore was one of the hardest hit economies by the global financial crisis. The economy contracted by 9.4% in the first quarter of 2009, the worst contraction recorded in the history of Singapore. The severe contraction was mainly due to the dramatic falls in aggregate demand in Singapore’s key export markets.
- Exports dropped sharply towards the end of 2008 and continued to record double-digit declines up to September 2009. Year-on-year monthly export growth strongly rebounded in November (13.3%) and December (30.6%) 2009 but for 2009 as a whole exports declined by 10.3%.
- The economy started to show signs of recovery towards the second quarter of 2009. Quarter-on-quarter annualized GDP rebounded to positive 16.2% in the second quarter and by the third quarter, the economy escaped recession with the year-on-year GDP recording 0.6% growth.
- Singapore was able to contain the fallout from the global financial crisis through swift government intervention. On January 2009, the stimulus package of US $13.7 billion was approved to secure jobs, boost domestic consumption and stimulate bank lending.
- GDP growth is forecast to rebound strongly by 7.0% in 2010 after having contracted by 2% in 2009.
Inflation, monetary policy and exchange rate developments
- Inflation decelerated rapidly towards the end of 2008 as the price of crude oil and other commodities plunged. Inflation remained depressed throughout 2009 at 0.6% but is likely to pick up in 2010 as Singapore’s economy quickly recovers alongside the global economy, putting upward pressure on inflation. Inflation is forecast to increase to 2.3% in 2010.
- The Monetary Authority of Singapore maintained a zero-appreciation policy of its target exchange rate since October 2008 due to the weakening global demand for Singapore’s exports. However, on April 14, 2010, the Singapore’s central bank announced a revaluation of the Singapore dollar in view of its vigorous economic recovery and upward pressures on inflation.
Fiscal situation and perspectives
- Owing mainly to increased expenditure and weak revenue growth, the government’s fiscal position went from a surplus of 1.5% of GDP in 2008 to a deficit of 1.1% in 2009. The deficit is expected to increase in 2010 as the government continues on with its fiscal stimulus package. The Jobs Credit Scheme and Special Risk-sharing Initiative will be phased out during 2010/11.