Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or
distributed to parties outside the presentation. DBS Bank accepts no liability whatsoever with respect to the use of this document or its contents.
Economic outlook on Singapore
Better timesIrvin Seah
Executive Director
DBS Group Research
Feb 2018
US: Recovery gaining strength
2
2.5
1.6
2.2
1.5
2.4
2.6
1.5
2.3
2.6
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
2010 2011 2012 2013 2014 2015 2016 2017f 2018f
US GDP growth
% YoY
Eurozone: Stronger than usual
3
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
M ar-13 M ar-14 M ar-15 M ar-16 M ar-17
CPI inflat ion, % YoY
GDP,% QoQ saar
GDP, % YoY
EZ: Fundamentals are stronger than usual
% YoY, % QoQ saar
Latest: 4Q17
China: Towards sustainable growth
4
6
7
8
9
10
11
12
China GDP, YoY%
4Q17: 6.8%
Technical payback after a strong surge
5
▪ GDP growth registered 3.6% in 2017
-3
-1
1
3
5
7
9
11
13
M ar-14 Sep-14 M ar-15 Sep-15 M ar-16 Sep-16 M ar-17 Sep-17
% YoY, % QoQ saar
Chart 1: Technical pullback in 4Q17
Latest: 4Q17
% QoQ saar
% YoY3.6%
2.1%
6
Blip in manufacturing
-10
-5
0
5
10
15
20
25
30
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18
M anufacturing ex Biomedical
Overal l M anufacturing
YoY%
Pullback in manufacturing
Latest: Jan18
7
Normalisation of the electronics cycle
-10
-5
0
5
10
15
20
25
30
-10
0
10
20
30
40
50
60
70
80
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18
Semicon billing, 3mma (LHS)
Semicon shipments, 3mma
Electronics demand normalising
% YoY % YoY
Latest: Jan/Feb18
8
Watch China …
-4
-2
0
2
4
6
8
10
12
Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18
US EU China
China is the key driver and key risk
%-pt contribution
63% of NODX growth
driven by China in 2017
9
Services to pick up the slack
-1
0
1
2
3
4
5
Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17
Biz services
Financial services
Tpt & storage
Wholesale & retail
Others
Services growth
YoY %-pt contribution
Turnaround in the services sector
Latest: 4Q17
10
Services will become the main growth engine
▪ GDP growth to register 3.0% in 2018, from 3.6% in 2017
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Mar-17 Sep-17 Mar-18 Sep-18
Services Producing Industries
Goods Producing Industries
GDP growth
Services to become key driver of growth
% YoY, %-pt contribution
2017: 3.6%
2018f: 3.0%
11
Labour market has bottomed
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
-6
-4
-2
0
2
4
6
8
10
12
14
2008 2010 2012 2014 2016
Services sector growth (LHS)
Job vacancy to unemployed person ratio
Services recovery to lift labour market
% YoY
Latest: 4Q17
ratio
12
Inflation still low
▪ Inflation to register 1.0 in 2018, up from 0.6% in 2017
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18
% YoY
Inflation still benign
CPI inflation
Core inflation
30 yrs historical avg DBSf
2017: 0.6%
2018f: 1.0%
MAS in normalisation mode
13Source: DBS Research
88
90
92
94
96
98
100
102
104
106
108
110
2010 2011 2012 2013 2014 2015 2016 2017
Lower limit
Mid point
Upper limit
SGD NEER
Indexed: 1-5 Apr 2013 = 100
DBS SGD NEER and policy band
Zero
appreciation
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or
distributed to parties outside the presentation. DBS Bank accepts no liability whatsoever with respect to the use of this document or its contents.
Budget 2018
Enhancing sustainability
Committee for Future Economy
Connectivity
Corporate capabilities and innovation
Jobs and skills Future growth industries and market
Urban development and infrastructure
Committee For Future Economy
16
Budget 2018
Sources: DBS Research
Near term measures(e.g., CIT rebate, WCS, SG
Bonus, U-Save, Edusave,
S&CC rebate, enhanced
housing grant)
CompaniesTransform local companies
via innovation, capability
development and
internationalisation
SingaporeansPromote inclusive growth,
deepen skills
Medium term
restructuring(e.g., ITMs, PSG, EDG, DTDi,
NRP, tax deductions for R&D
and IP, TeSA)
Budget 2018
• Overall budget deficit: SGD 0.6bn
• Primary deficit: SGD 7.34bn
• Govt expenditure up 8.3%
Smart and
sustainable city(Carbon tax, Energy grid 2.0,
Smart Nation, Infrastructure
Development Fund)
Fiscal rebalancing(GST hike, BSD adjustment,
financing infrastructure
development by borrowing)
CIT: Corporate Income Tax
S&CC: Services and Conservancy Charges
WCS: Wage Credit Scheme
ITMs: Industry Transformation Roadmaps
PSG: Productivity Solutions Grant
EDG: Enterprise Development Grant
DTDi: Double Tax Deduction for Internationalisation
NRP: National Robotic Programme
TeSA: Tech Skills Accelerator
GST: Goods and Services Tax
BSD: Buyer Stamp Duty
17
The GST hike
Sources: DBS Research
• The GST rate will be raised by 2%-pts to 9% between 2021-2025. It was last
adjusted in 2007, from 5% to 7%.
GST, VAT rates for some regional countries
UK 20%
France 20%
Germany 19%
China 17%
New Zealand 15%
Philippines 12%
Korea 10%
Indonesia 10%
Australia 10%
Japan 8%
Singapore 7%
Thailand 7%
Malaysia 6%
Govt Operating Revenue, FY2016 SGD mn % share
Total operating revenue 67,969.40 100.0
Tax 57,803.60 85.0
Tax: Income: Corporate 13,396.70 19.7
Tax: Income: Personal 10,190.60 15.0
Tax: Income: Withholding 1,456.10 2.1
Tax: Contributions By Statutory Boards 779.60 1.1
Tax: Assets Taxes 4,380.70 6.4
Tax: Customs & Excise Duties 2,843.20 4.2
Tax: Goods and Services 10,841.30 16.0
Tax: Motor Vehicles 2,111.70 3.1
Tax: Betting Taxes 2,693.00 4.0
Tax: Stamp Duty 3,091.80 4.5
Tax: Others 6,018.90 8.9
Fees & Charges 9,439.00 13.9
Fees & Charges: Vehicle Quota Premiums 6,271.90 9.2
Fees & Charges: Others 3,166.70 4.7
Other Receipts 727.00 1.1
• Every one percentage point hike in the GST will add about SGD 1.6-1.8bn to the
fiscal position, about 0.7% of GDP.
18
A rapidly aging population
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
SG: An aging populationmillion pax
Total population
Total population
ex immigration
Zero growth
from here on
Sources: UN, DBS
19
Rising median age
Sources: UN, DBS
37.340.0
42.544.9
47.048.8 50.3 51.7 53.0
0
10
20
30
40
50
60
2010 2015 2020 2025 2030 2035 2040 2045 2050
SG: Median age will continue to riseyrs old
20
A shrinking workforce …
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
SG: Workforce w ill shrink from 2025 onwards% chg million pax
Labour force
Labour force growth rate
Sources: UN, DBS
21
Rising financial burden
17.6
23.0
30.1
37.7
44.1
50.3
54.857.4
0
10
20
30
40
50
60
70
2015 2020 2025 2030 2035 2040 2045 2050
SG: Old age dependency ratio w ill keep rising
Ratio
Ratio of population aged
65+ per 100 person
Sources: UN, DBS
22
Rising social expenditure
Sources: Department of Statistics, Singapore
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
1999 2002 2005 2008 2011 2014 2017
Social expenditure
4 per. Mov. Avg. (Social expenditure)
Rising social expenditureSGD mn
Latest: 3Q17
23
Fiscal sustainability is key!
Sources: DBS Research
-10
-5
0
5
10
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
Special transfers ex top-up to endownment & trust funds
Primary surplus/deficit
Basic surplus/deficit
Primary and basic deficits deepening
SGD bn
Singapore's overall fiscal position
Revised Estimated Chg over
FY2017 FY2018 FY 2017
SGD bn SGD bn % change
Operating revenue 75.15 72.68 -3.3
Less:
Total expenditure 73.92 80.02 8.3
Operating expenditure 56.10 57.67 2.8
Developmental expenditure17.82 22.35 25.4
Primary surplus/deficit 1.24 -7.34
Primary balance as % of GDP 0.29 -1.66
Less:
Special transfers 6.23 9.11 46.2
Add:
NIRC 14.61 15.85 8.5
Overall surplus/deficit 9.6 -0.6
Overall balance as % of GDP 2.1 -0.1
24
Primary deficit deepened further in YA18
Sources: DBS Research
Primary Deficit:
SGD7.34bn
Overall Deficit:
SGD0.6bn
Special Transfers:
+46.2%
25
Contribution from NIRC has its limitation
Sources: DBS Research
0
2
4
6
8
10
12
14
16
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Contributions from NIRC
SG: Limited upside to NIRC contributions
SGD bn
Inclusion of
Temasek into
NIRC framworks
26
Key points
Sources: DBS Research
• Resources is limited, hence there is a need to keep a tight rein
on spending
• Reserves is about inter-generation transfers. The more we
spend today, the less we have for tomorrow
• Prudent fiscal planning is key!
What goes beyond hiking taxes or cutting subsidies?
• Growing the pie
• Cost management
• Better return from investment of the reserves
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or
distributed to parties outside the presentation. DBS Bank accepts no liability whatsoever with respect to the use of this document or its contents.
Thank you
2828
GDP & inflation forecasts
GDP growth, % YoY CPI inflation, % YoY, ave
2016 2017e 2018f 2019f 2016 2017e 2018f 2019f
China 6.7 6.9 6.4 6.2 2.0 1.6 2.1 2.2Hong Kong 2.0 3.7 2.5 2.5 2.4 1.7 2.0 2.5India* 8.0 7.1 6.6 7.2 4.9 4.5 3.7 4.6Indonesia 5.0 5.1 5.3 5.4 3.5 3.8 4.0 4.5Malaysia 4.2 5.9 5.0 5.0 2.1 3.8 3.5 3.0Philippines 6.9 6.7 6.7 6.7 1.8 3.2 3.6 3.8Singapore 2.0 3.6 3.0 2.7 -0.5 0.6 1.0 1.8South Korea 2.8 3.1 2.9 2.9 1.0 1.9 1.8 1.8Taiwan 1.4 2.9 2.8 2.4 1.4 0.6 1.0 1.0Thailand 3.2 3.9 4.0 4.0 0.2 0.7 1.5 1.5Vietnam 6.2 6.8 6.4 6.6 2.7 3.5 3.6 3.8
Eurozone 1.8 2.5 2.2 2.2 0.2 1.5 1.3 1.4Japan 0.9 1.6 1.1 0.9 -0.1 0.5 0.6 1.0United States** 1.5 2.3 2.6 2.5 1.3 1.6 1.8 1.8* refers to year ending March ** eop for CPI inflation
2929
Interest rate and FX forecasts1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19
China* 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35India 6.00 6.00 6.00 6.00 6.25 6.25 6.50 6.50Indonesia 4.25 4.25 4.25 4.50 4.75 5.00 5.00 5.00Malaysia 3.25 3.25 3.50 3.50 3.50 3.50 3.50 3.50Philippines 3.25 3.50 3.75 4.00 4.25 4.50 4.50 4.50Singapore** 1.40 1.65 1.90 2.15 2.15 2.40 2.40 2.65South Korea 1.50 1.75 1.75 2.00 2.00 2.25 2.25 2.25Taiwan 1.38 1.38 1.38 1.50 1.50 1.63 1.63 1.75Thailand 1.50 1.50 1.50 1.50 1.75 2.00 2.25 2.50Vietnam*** 6.25 6.25 6.25 6.25 6.50 6.50 6.75 6.75
Eurozone 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Japan -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10United States 1.75 2.00 2.00 2.25 2.25 2.50 2.50 2.75* 1-yr lending rate; ** 3M SOR ; *** prime rate
Policy interest rates, eop
Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19
China 6.39 6.49 6.60 6.56 6.52 6.48 6.44 6.40Hong Kong 7.82 7.83 7.83 7.82 7.82 7.81 7.81 7.80India 64.7 65.9 67.0 67.2 67.4 67.6 67.8 68.0Indonesia 13,596 13,747 13900 13,960 14,019 14,079 14,140 14200Malaysia 3.95 4.08 4.20 4.18 4.16 4.14 4.12 4.10Philippines 52.6 53.3 54.0 54.4 54.8 55.2 55.6 56.0Singapore 1.32 1.35 1.38 1.37 1.37 1.36 1.36 1.35South Korea 1,082 1,121 1160 1,148 1,136 1,124 1,112 1100Thailand 31.8 32.8 33.9 33.6 33.3 33.1 32.8 32.5Vietnam 22,745 22,832 22920 22,970 23,020 23,069 23,120 23170
Australia 0.78 0.76 0.74 0.75 0.76 0.76 0.77 0.78Eurozone 1.23 1.19 1.16 1.17 1.19 1.20 1.22 1.23Japan 108 112 116 115 114 112 111 110United Kingdom 1.39 1.37 1.35 1.37 1.38 1.40 1.41 1.43Australia, Eurozone and United Kingdom are direct quotes
Exchange rates, eop
30
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