Adjusting to slower global demand


MEDIUM RISK for entreprise

  • Economic risk

  • Business environment risk

  • Political risk

  • Commercial risk

  • Financing risk

GDP USD323.9bn (World ranking 36, World Bank 2017)
Population 5.6mn (World ranking 114, World Bank 2017)
Form of state Parliamentary Republic
Head of government LEE Hsien Loong (PM)
Next elections 2021, Parliamentary elections
  • Stable political system and effective policymaking, including prudent macroeconomic policies
  • High-income country that serves as a regional and global hub for trade with the world’s 2nd busiest port
  • Strong external position with a track record of current account surpluses, ample foreign exchange reserves, and low public external debt
  • Strong business environment and banking sector
  • Strategic position at the heart of South-East Asia
  • High dependence on exports
  • Pressure on productive population due to high old age dependency ratio
  • Shift to a mature economy implies slower growth in the medium and long-term

2019 outlook: It is all about trade

Singapore’s economic growth is set to slow to +2.3% in 2019 (after +3.2% in 2018) due to slower growth in global trade. Exports growth will likely be weak in the first half of the year, hampered by US-China trade-related uncertainties and weaker growth in China. We expect a modest uptick in the remainder of the year, thanks to a de-escalation of tensions between the two economic giants, and an acceleration of growth in China as expansionary policies kick in. Domestically, fundamentals are broadly firm. Reduced household debt (67% GDP in 2018 from 74% in 2014), a low unemployment rate, gradual growth in wages and contained inflation contribute to the resilience of private consumption. Corporates entered 2019 on a firm footing (with strong balance sheets inherited from 2018). Yet we expect them to be conservative in their capital expenditures in 2019 because of lower sales as global demand slows, and difficult sales planning in a context of trade uncertainties.

Risks to the outlook are mainly external. They stem from (i) slower than expected growth among main trading partners and an escalation of the US-China trade feud, and (ii) tighter global financial conditions, which could increase debt-servicing and refinancing costs.  

Macro-policies: prudent and dovish approach

The Monetary Authority of Singapore will be more dovish in 2019. After tightening its policy twice last year, it left it unchanged in April 2019, citing lower than expected inflation and a weaker growth outlook. As economic growth will likely converge to the lower range of the current authorities’ growth forecast (+1.5% to +3.5%) and inflationary pressures be contained (1% in 2019), we expect the pause in the tightening cycle to be extended in October.

Public finances are under control and fiscal policy is fairly balanced. The 2019 budget projects an overall deficit of -0.7% of GDP. The authorities will stick to their long-term priorities of: prudence by keeping spending in check; reinforcing Singapore’s economic transformation by expanding businesses capabilities (with initiatives such as the SME co-investment fund III, Innovation Agent Programs, for e.g.) and inclusive growth with targeted support to most fragile agents (elders with Merdeka Generation Package, the poor with the Bicentennial Bonus). 

Business environement: top notch

The country usually tops the rankings in all business-related surveys. It ranked 2nd in the last World Bank Doing Business survey, helped by business-friendly regulation (easiness to open business, to construct), favourable taxation and business protection. It also ranks 7th in the Logistic Perfromance Index with good rankings in both hard (physical) and soft  (institutions, for e.g.) infrastructure. Politically, the environment is stable with the same party in power since independence, and a proactive and stable policy direction. 

Trade structure by destination/origin

(% of total)

Exports Rank Imports
China 14%
14% China
China, Hong Kong SAR 11%
11% United States
Malaysia 11%
11% Malaysia
Indonesia 8%
8% Taiwan
United States 7%
6% Japan

Trade structure by product

(% of total)

Exports Rank Imports
Electrical machinery and apparatus 29%
24% Electrical machinery and apparatus
Petroleum and related materials 13%
21% Petroleum and related materials
Office and automatic data processing machines 6%
5% Office and automatic data processing machines
Organic chemicals 4%
4% Telecommunication and sound recording apparatus
Specialised machinery 4%
3% Other industrial machinery and parts

The payment behavior of domestic companies and the DSO is good. However, the law provides no guidelines as to how late payments should be handled and contracts remain the only reference when business relationships turn sour.

  • Low

  • Medium

  • Sensitive

  • High

  • Payments

  • Court proceedings

  • Insolvency proceedings

Overall, legal action remains expensive even though the court system is fairly efficient.

The insolvency framework is in line with international standards however in practice, as in most countries, collecting debt from insolvent debtors would prove to be a genuine challenge.

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