SINGAPORE (July 16): The International Monetary Fund (IMF) has cut Singapore's 2019 growth forecast to 2% from 2.3% as global trade tensions hit exports from the city-state.
Singapore's economy grew just 0.1% in the second quarter, its slowest annual pace in a decade, raising bets of a recession and monetary policy easing.
"Given global trade tensions, support from external sectors is expected to fall and growth drivers are projected to shift back to domestic demand," the Washington-based lender said on Tuesday.
"Risks to the outlook are tilted to the downside and mainly stem from external sources, including a tightening of global financial conditions, escalation of sustained trade tensions, and deceleration of global growth,” it added.
Singapore's economic growth should stabilise around 2.5% over the medium term, the IMF said, adding that its forecasts were based on discussions with Singaporean officials that ended on May 14.
Singapore's central bank had forecast growth this year to be between 1.5% and 2.5%, down from 3.2% in 2018.
Meanwhile, IMF has also reaffirmed Singapore’s financial sector oversight to be “among the best globally”.
The economic fundamentals of Singapore were strong and its economic policies sound, said IMF.
Overall, the financial sector in Singapore was also assessed to be resilient, with healthy buffers to withstand severe adverse shocks.
These were some of the findings from the Financial System Stability Assessment (FSSA) report on Singapore after the organisation completed its Financial Sector Assessment Programme (FSAP) for the republic.
Among other key findings from the assessment, IMF noted that MAS has struck a good balance in fostering financial innovation while strengthening regulatory oversight since its last FSAP review in 2013.
It also found Singapore’s financial system to be resilient “even under very adverse scenarios”, as demonstrated by stress tests, including a large-scale global financial market turmoil.
MAS also was assessed to have the ability to act proactively to address emerging threats to financial stability through the use of macroprudential policies.
In the area of fintech regulation and supervision, IMF said MAS has struck a good balance between promoting financial innovation, while safeguarding financial stability.
In a Tuesday press release, MAS says it welcomes the positive assessment of Singapore’s financial system.
“We will review the IMF’s recommendations within the reports, and undertake appropriate measures to further strengthen our financial oversight. We thank the financial industry representatives for participating in the FSAP,” says MAS.
Ravi Menon, Managing Director of MAS, says, “The FSAP is a rigorous assessment, and we are pleased that it has reaffirmed Singapore’s standing as a sound, stable and well-regulated financial centre. But ensuring that regulation and supervision remain relevant is always work-in-progress and we are pleased to have had the opportunity to learn from the IMF’s global experience in financial sector surveillance and analysis.”