Singapore

Strong fundamentals and growth prospects

AA1

LOW RISK for enterprise

Economic risk
Business environment risk
Political risk
Commercial risk
Financing risk

Economic risk
Business environment risk
Political risk
Commercial risk
Financing risk

Last updated in February 2022.

Swipe to view more

GDP	USD339.9bn (world ranking 36, World Bank 2020)
Population	5.7mn (world ranking 114, World Bank 2020)
Form of state	Parliamentary Republic
Head of government	LEE Hsien Loong (PM)
Next elections	by July 2025, general election

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
Land scarcity as the government seeks to expand population in the long run

useful description of image if informative and not decoration only.

A solid post-Covid recovery

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.

Generally sound economic structure, with very few areas of vulnerability

Singapore’s short-term financing risk is deemed low. Public debt is very high on paper (c.140% of GDP in 2021) but it presents little risk as it is mostly denominated in local currency and covered by government assets. The government rarely runs large fiscal deficits and has fiscal reserves it can draw from if needed. Overall external debt is also very high on paper (c.440% of GDP in 2021) but it concerns the private sector and is mostly constituted by intra-corporate group debt – reflecting Singapore’s position as a regional financial center. Generally speaking, external account and currency risks are very limited, given Singapore’s ample FX reserves that were accumulated thanks to decades of large current account surpluses (the ratio to GDP averaged 18% in the 2010s).

One vulnerability to note is Singapore’s strong link with global economic cycles, given the economy’s heavy dependence on external trade, and especially the electronic and shipping sectors. The government aims to transform Singapore into a center for advanced manufacturing and pharmaceuticals, and to diversify manufacturing away from electronics.

Business environment and political developments

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”.

Trade structure by destination/origin

(% of total, 2020)

Exports	Rank	Imports
China 15.5%	1	14.4% China
Malaysia 11.3%	2	13.0% Malaysia
China, Hong Kong SAR 11.1%	3	11.1% United States of America
United States of America 8.5%	4	8.8% Taiwan
Indonesia 6.5%	5	5.6% Japan

Trade structure by product

(% of total, 2020)

Exports	Rank	Imports
Electrical machinery and apparatus 30.1%	1	25.5% Electrical machinery and apparatus
Petroleum and related materials 12.1%	2	16.2% Petroleum and related materials
Organic chemicals 4.8%	3	5.1% Gold, non-monetary (excluding gold ores and concentrates)
Office machines and automatic data processing machines 4.7%	4	4.7% Office machines and automatic data processing machines
Specialised machinery 4.5%	5	4.4% Other transport equipment

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

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.