Singapore

Singapore has a strong track record of economic growth, averaging +5.4% in the 2000s and +5.0% in the 2010s. The economy was severely hit by the pandemic, with a -5.4% GDP decline in 2020. A strong recovery followed in 2021 (+7.6%), buoyed by improving corporate and household confidence, as well as important external demand (especially in the electronics, chemicals and advanced manufacturing sectors). Growth rates are likely to cool down and return to more normal levels from 2022, though still underpinned by the continued recovery of domestic demand as rapid vaccination progress allows the government to start treating Covid-19 as endemic.

Several packages were announced to cushion the impact of the global pandemic, with measures such as cash payouts, wage subsidies and financial support for some targeted sectors (e.g. tourism). This pushed the fiscal balance into a large deficit of -8.9% of GDP in 2020. The economic recovery and less broad-based supportive measures have allowed the fiscal deficit to narrow significantly since and this is likely to continue in 2022, with a fiscal surplus possible from 2023.

On the monetary front, after keeping an accommodative stance for around a year and half, the Monetary Authority of Singapore (MAS) tightened monetary policy in October 2021 and again in January 2022. It raised slightly the slope of the currency to tackle the risk of rising inflationary pressures and in anticipation of the US Federal Reserve's policy rate hikes. The MAS tightening cycle is likely to go through 2022-2023.

Singapore ranks second in the 2020 World Bank Doing Business survey. The country’s strengths are particularly in enforcing contracts (ranking first), protecting minority investors (third), starting a business (fourth) and dealing with construction permits (fifth). It benefits from high-quality bureaucracy, with a low level of corruption despite the clout exerted by government-linked companies (GLCs). The legal system is also effective in handling business disputes. However, Singapore fares badly in trading across borders (ranking 47th), getting credit (37th), resolving insolvency (27th), registering property (21st) and getting electricity (19th).

Generally speaking, Singapore’s political environment is stable and efficient. In recent developments, the ruling People’s action party (PAP), run by Lee Hsien Loong, has ceded some ground in the polls to the Workers’ Party since its victory in July 2020. To counter this trend, it is likely to increase its focus on welfare, though no major disruption on business taxation is expected. It is also increasingly opening up on societal issues to keep the young electorate at a moment when the “3rd generation” PAP leaders, or “3G”, are to hand power over to “4G” members. However, press freedom, especially for foreign outlets, remains under strain as the government will clamp down on any criticism it deems “illegitimate”. This is partly why the country is sometimes referred to as a “flawed democracy”.