Singapore
Briefing Notes for the Launch in Singapore, March 2008
Economic growth
- Singapore’s economic growth rate decreased slightly from 7.9% in 2006 to 7.5% in 2007
- Both private consumption and gross fixed investment grew faster in 2007 than in 2006
- Private consumption doubled its growth rate from 2.5% in 2006 to 5.2% in 2007
- Investment increased its growth rate from 11.5% in 2006 to 17.7% in 2007
- In contrast, government consumption decreased its growth rate from 11.3% in 2006 to -0.4% in 2007
- Overall, the growth rate of domestic demand increased from 6.4% in 2006 to 8.4% in 2007
- The strong performance of domestic demand helped sustain gross domestic product (GDP) growth at a rate slightly lower than the previous year in the face of a drop in the rate of growth of exports, from 10.4% in 2006 to 6.5% in 2007
- GDP growth is forecast to slow down to 4.9% in 2008
Inflation and monetary policy developments
- The inflation rate doubled from 1.0% in 2006 to 2.1% in 2007
- The three CPI items that increased the most in 2007 were health care (4.1%), recreation (3.1%), and food (3.0%)
- Year-on-year price increases accelerated from 0.5% in the first semester to 1.0% in the second, 2.8% in the third, and 4.1% in the fourth
- In January of 2008, the inflation rate accelerated to 6.6%, with prices of housing, health care, transportation and communication, and food increasing more than 5% year-on-year
- The increase in prices since the second half of 2007 is partly due to the 2-percentage points increase in the goods and services tax to 7%, which took effect on July 1st of that year
- As inflation picked up in the second half of 2007, the Monetary Authority of Singapore indicated it will allow a somewhat faster appreciation of the Singapore dollar against a trade weighted basket of foreign currencies
- The Singapore dollar appreciated over 5% against the U.S. dollar during 2007, putting downward pressure on domestic price inflation
- The inflation rate is forecast to increase to 3% in 2008
Exchange rates and foreign exchange reserves
- The exchange rate appreciated from an average of 1.54 SG$/US$ in January of 2007 to an average of 1.45 SG$/US$ in December of 2007
- The Singapore dollar continued appreciating during the first two months of 2008, to an average of 1.41 SG$/US$ in February 2008
- Foreign exchange reserves increased 20% between January and December of 2007, from US$ 134.6 billion to US$ 163.0 billion.
External sector
- The current account surplus increased by US$ 9.5 billion, from US$ 36.4 billion in 2006 to US$ 45.9 billion in 2007
- The goods trade surplus increased by US$ 4.7 billion, the services trade deficit increased by US$ 1.0 billion, and the surplus in the income account increased by US$ 5.8 billion.
- Singapore’s terms of trade deteriorated by 5.8% compared to the previous year, due to higher commodity prices
- Singapore’s exports has been affected by a weaker demand for semiconductors and other electronic products
- Inward direct investment increased by US$ 0.8 billion, from US$ 24.2 billion in 2006 to US$ 25.0 billion in 2007, while outward direct investment increased by US$ 3.0 billion, from US$ 8.6 billion to US$ 11.6 billion.
- The external debt increased US$ 1.25 billion, from US$ 24.4 billion in 2006 to US$ 25.6 billion in 2007.
