- Singapore's economy recovered in 2024 but is forecast to slow down in 2025 due to the recent escalation of global trade tensions. Inflation is expected to stay muted.
- Fiscal and monetary policies are appropriately supporting the economy. Singapore has ample fiscal space to provide additional temporary and targeted support in case downside growth risks materialize.
- Singapore's financial sector remains sound and resilient, underpinned by well-capitalized and liquid banks. Potential financial sector risks from tightening global financial conditions should continue to be closely monitored.
Washington, DC: An International Monetary Fund (IMF) team, led by Mr. Masahiro Nozaki, conducted discussions on the 2025 Article IV Consultation with the Singaporean authorities and other stakeholders from May 5 to May 15, 2025. At the conclusion of the discussions, Mr. Nozaki issued the following statement:
"Singapore's economy recovered strongly in 2024 and disinflation advanced. Growth increased to 4.4 percent in 2024, from 1.8 percent in 2023, supported by an upturn in the global technology cycle. Headline inflation decreased to 1.5 percent in end-2024 and further to 0.9 percent in March 2025, reflecting disinflation in both tradable and non-tradable prices.
"However, the recent escalation of trade tensions and an associated spike in global policy uncertainty—as highlighted in the April 2025 World Economic Outlook—have sharply weakened Singapore's economic outlook. Growth is projected to slow to 1.7 percent in 2025. Inflation is expected to stay muted, with headline inflation and Monetary Authority of Singapore (MAS) Core Inflation forecast at 1.1 percent and 1.0 percent in 2025, respectively, due to emerging slack in the economy and projected declines in commodity and other tradables prices from slower global growth.
"There is a high degree of uncertainty around this forecast, reflecting elevated global economic and policy uncertainty. Risks to growth are firmly tilted to the downside, stemming from a possible further escalation of global trade tensions and a sharp tightening of global financial conditions. While risks to inflation are tilted to the downside due to weaker-than-expected global and domestic growth, potential upside inflation risks, including from possible supply chain disruptions, should also be monitored.
"Against this backdrop, MAS appropriately loosened monetary policy in January and April 2025. In view of weak inflation, slowing growth, and emerging slack in the economy, staff sees scope for further monetary policy easing in the near term. However, MAS should remain vigilant and data dependent with respect to the speed and magnitude of easing in light of the large uncertainty, as well as both upside and downside risks around the inflation outlook.
"The expansionary fiscal stance for FY2025 (April 2025-March 2026) is appropriate against the backdrop of slowing growth, increasing economic slack, and elevated downside risks. Continued support to households and firms will provide ongoing relief, while enhanced infrastructure spending will support domestic demand and help promote long-term growth. Singapore has ample fiscal space that can be deployed to provide targeted and temporary fiscal support in the event of downside risks materializing. Over the medium term, currently untargeted transfers should be phased out or better targeted to vulnerable households and firms. With strong fiscal institutions and buffers, Singapore is well positioned to meet its medium-term fiscal spending needs, including for rising healthcare costs due to an aging population, scaling up high-quality public infrastructure, and strengthening social safety nets.
"Singapore's financial sector is resilient. Banks are well capitalized, have ample liquidity, and are profitable. The authorities' regulatory and supervisory efforts have contained existing financial sector vulnerabilities, including from cross-border exposure, reliance on foreign exchange funding, residential and commercial real estate exposures, interconnectedness between banks and nonbank financial institutions (NBFIs), and exposures to relatively small segments of highly leveraged corporates and households. Nonetheless, in view of the risk of a sharp tightening of global financial conditions, continued vigilance is warranted against these vulnerabilities.
"We welcome the steady implementation of the authorities' Forward Singapore initiative, including enhanced paid parental leave to support young families; enhanced grants for low-income first-time home buyers to improve housing affordability; and additional transfers to improve the retirement adequacy for low-income workers and retirees. The introduction of temporary financial support for involuntarily unemployed individuals has helped strengthen Singapore's social safety nets. The government continues to make progress with helping workers to reskill and firms to adopt AI technologies.
"The IMF team would like to thank the authorities and other counterparts for their close collaboration and productive discussions."
