The ruling PAP's landslide victory in 2015's elections, along with a comfortable by-election victory in May 2016, support our assertion that the party is experiencing a resurgence in popular support. However, we expect the party to broadly retain its policy strategy adopted in 2011, as its more consultative approach to governance appears to have paid significant dividends.
Singapore's ongoing restructuring drive continues, with the ruling People's Action Party (PAP) pushing ahead with stricter foreign labour rules despite an increasingly tight labour market. We believe that the tight labour market is acting as a significant headwind to real GDP growth, but do not see the ruling People's Action Party (PAP) easing measures in any significant way despite its landslide victory in September's parliamentary elections.
Key Forecast Changes
We have revised our forecast for real GDP growth in 2016 down to 1.7% (from 1.9% previously) to reflect the scale of difficulties that the city-state's economy faces over the near-term. Singapore's labour intensive manufacturing industry is losing competitiveness as a result of an extremely tight labour market, and along with a difficult external environment, this will cap growth over the coming quarters.
Despite Singapore's sound fundamentals, the confluence of weak external demand (led by a rapidly slowing Chinese economy) and domestic economic restructuring could give rise to a technical recession over the coming quarters.
|Nominal GDP, USDbn||293.1||278.4||287.2||305.2|
|Real GDP growth, % y-o-y||3.3||2.0||1.7||2.2|
|Consumer price inflation, % y-o-y, eop||-0.1||-0.6||1.0||2.5|
|Exchange rate SGD/USD, eop||1.32||1.42||1.40||1.37|
|Budget balance, % of GDP||1.3||-1.2||1.0||1.2|
|Current account balance, % of GDP||20.1||20.7||18.5||17.2|
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