IMF praises Singapore’s economic resilience but warns on inflation
The International Monetary Fund (IMF) has on Wednesday commended Singapore for its gradual economic recovery following a challenging 2023.
The statement issued by the IMF’s executive board following the completion of its Article IV consultation with Singapore.
The city-state’s economy has shown resilience, with growth rebounding on the back of a revived semiconductor industry and a surge in tourism.
“Growth started to recover in 2023H2, reflecting improved global demand for semiconductors, and strengthened further to 2.7 percent (year-on-year) in 2024Q1, supported by strong inbound tourism.”
However, the IMF has sounded a note of caution regarding persistent inflationary pressures. Despite a decline in headline inflation, the fund believes that price pressures remain elevated, particularly in the services sector. To address this, the IMF has recommended maintaining the current tight monetary policy stance until inflation is firmly under control.
“(IMF) Directors supported the authorities’ tight monetary policy stance, noting that it should remain in place until inflationary pressures firmly recede. They emphasised that monetary policy should continue to be data dependent and articulated through clearly communicated policy decisions.”
The IMF also endorsed Singapore’s fiscal policy, acknowledging the government’s strong financial position. While the fund encouraged increased government spending to address long-term challenges such as aging population and technological advancements, it emphasized the importance of maintaining fiscal prudence.
Furthermore, the IMF praised Singapore’s robust financial sector, characterized by strong capital and liquidity buffers. Nevertheless, the fund urged continued vigilance against potential vulnerabilities in the housing market and the non-bank financial sector.
The IMF’s assessment highlights Singapore’s economic strength while emphasizing the need for continued caution and strategic policymaking to navigate future challenges.
Attribution: The International Monetary Fund (IMF)
