Singapore: The Executive Board of the International Monetary Fund (IMF) has concluded its Article IV consultation with Singapore, offering an in-depth analysis of the country’s economic status and future prospects.
According to International Monetary Fund, Singapore’s economy saw a resurgence in 2024 with growth reaching 4.4 percent, a notable increase from 1.8 percent in 2023. This growth was largely driven by robust private consumption and a positive turn in the global technology cycle. However, the momentum did not sustain into 2025 as the economy contracted by 0.6 percent quarter-on-quarter in the first quarter due to trade tensions and global policy uncertainty, impacting sectors like manufacturing and wholesale trade.
The IMF’s report highlights a disinflation trend with inflation dropping below 2 percent by the end of 2024 and continuing into early 2025. Expectations for inflation remain stable, hovering just under 2 percent. Singapore’s labor market, while tight in 2024, showed signs of softening with the unemployment rate rising slightly from 1.9 percent in December 2024 to 2.1 percent in March 2025.
Singapore’s current account balance recorded a surplus of 17.5 percent of GDP in 2024, down from 17.7 percent in 2023. The banking sector remains robust, with a capital adequacy ratio of 18.9 percent in the first quarter of 2025, supported by strong asset quality and adequate provisioning. The liquidity coverage ratio and net stable funding ratio of Domestic Systemically Important Banks meet the required standards. Investment funds have managed investor redemption requests effectively during volatile periods in August 2024 and April 2025.
The IMF Directors generally endorsed the expansionary fiscal stance in Singapore’s FY2025 budget, seeing it as a means to bolster economic activity. They noted the fiscal overperformance and suggested that Singapore has ample fiscal space to provide temporary, targeted support if growth risks intensify. The Directors advised reducing the fiscal surplus, phasing out untargeted transfers, and increasing infrastructure spending to accommodate medium-term spending needs.
The IMF’s assessment indicates that Singapore’s external position was stronger than warranted by medium-term fundamentals in 2024. However, some Directors pointed out that Singapore’s unique features could lead to uncertainty in external balance assessments. They anticipate that Singapore’s current account surpluses will decrease over the medium term due to factors like ageing population, slower income growth, and increased public spending. The Directors acknowledged efforts to enhance public investment and social safety nets and urged continuation of these initiatives.
The financial sector in Singapore remains resilient, with macroprudential policies in place to prevent housing-related systemic risks. The IMF emphasized vigilance towards vulnerabilities from cross-border and foreign exchange exposures, commercial real estate, and highly leveraged entities. The Directors commended ongoing stress testing and contingency planning efforts and stressed the importance of strengthening the AML/CFT framework.
Efforts to foster a stronger, more inclusive economy were recognized, including a temporary financial support scheme for involuntarily unemployed workers and initiatives to reskill workers and incorporate AI technologies. Investments in climate-resilient infrastructure were also highlighted as crucial for Singapore’s economic future.