M ONETARY AUTHORI TY OF SI NGAPORE

MACROECONOMIC REVIEW

28 April 2020

ECONOMIC POLICY GROUP

APRIL 2020/ VOLUME XIX/ ISSUE 1

 Contents
1 The International Economy
Box A: Does Infrastructure Development Affect the ASEAN-5 Countries’ Ability to
Chapters

Attract FDI?

2 The Singapore Economy

Labour Market and Inflation

3 Box B: An Analysis of Crisis Wage Support Schemes in Singapore

4 Macroeconomic Policy

A Asia’s Electronics Supply Chains and Global Trade Corridors

Features
Special

B Regulation, Technology and the Banking Sector

C Privacy, Trust in Banks, and Use of Cash

2
 International Economy
A Sharp Slowdown

RESTRICTED 3
 COVID-19 has inflicted a substantial negative
shock on the world economy.
Stringency Index and Total Confirmed
Composite PMIs
Cases
80 3000 60
Stringency
US
Index 55
70 2500

50

Index, >50=Expansion
Persons (Thousand)
60 2000 Japan
Eurozone Global
45
Index

50 1500
40

40 1000
Patients 35
Confirmed to
30 Date (RHS) 500
30
China
20 0 25
1 Feb 22 Feb 14 Mar 4 Apr 22 Apr 2018 Jul 2019 Jul 2020 Apr
4
 G3 has seen a sharp pullback in activity, even as
China has started to recover.
G3 Business Confidence China High Frequency Indicators

60 Japan Economy Watchers Corporate 105 800 Coal 2.0

Consumption Gaode
Trends Future Economic Conditions
(2017–19 Congestion Index
Average) (2017–19
700 Average), RHS 1.8
40 95

Thousand Tons
Coal
600 Consumption 1.6
Index

Index
Index
(2020)
20 85

500 1.4
US Regional Fed Survey
(6 Month Ahead Activity)
0 75 Gaode
400 Congestion 1.2
Germany IFO Business Index (2020),
Expectations (RHS) RHS
-20 65 300 1.0
2018 2019 2020Apr -4 -2 LNY 2 4 6 8 1011
5 Weeks Before/After LNY
 Policy responses have been swift and substantial.

Fiscal Impulse Growth Forecasts

Other Asia (ex-China & Japan)

Eurozone & Japan QOQ SAAR (%) Annual (%)
China
US 2019 2020 2020
5 2019 2020* 2021*
Q4 Q1* Q2*
% of NODX-weighted Global GDP

4 G3 −0.7 −5.0 −30.3 1.5 −5.8 3.8

3 Asia ex-
4.3 −19.4 1.6 3.8 −1.2 6.6
Japan

2
ASEAN-5 4.0 −16.6 −15.3 4.5 −2.3 6.6

1
Global 2.8 −14.6 −10.6 3.1 −2.7 5.8
0
2009 2020 *EPG, MAS forecasts
6
 The COVID-19 shock is likely to be disinflationary.

Profile of COVID-19 Outbreaks G3 Inflation Expectations

100000 2.5
US 10-year
Breakeven Inflation
India 2.0 Rate
Persons (Logarithmic Scale)

Japan
10000 Indonesia 1.5 Eurozone
5-year Forward

Per Cent
Philippines 5-year Inflation Swap Rate
Malaysia 1.0
Thailand
Japan 10-year
1000 0.5 Breakeven Inflation
Hong Kong Rate

Taiwan
0.0
Vietnam

100 -0.5
1 10 19 28 37 46 55 64 65 2017 2018 2019 2020
Days After 100th Confirmed Case Mar
7
 Domestic Economy
A Step-down in Growth

RESTRICTED 8
 The Singapore economy contracted sharply
in Q1 2020 with the onset of COVID-19.
Singapore’s GDP Growth Economic Activity Index

20
12
Trade-related
8
10
YOY
Travel-related
4
Per Cent

% YOY
0 0
Domestic-oriented
-4 Overall
Modern
-10 Services

-8
QOQ SAAR

-12 -20
2017 Q3 2018 Q3 2019 Q3 2020Q1* 2017 Q3 2018 Q3 2019 Q3 2020
* Advance Estimates 9 Jan–Feb
 Travel-related and consumer-facing industries
have taken a severe hit.
Tourist Arrivals Retail Sales
Asean China Basic Discretionary
20 Other Asia Americas 4
Europe Oceania
Others

% Point Contribution to YOY Growth

% Point Contribution to YOY Growth

0 0

-20 -4

-40 -8

-60 -12
Sep Oct Nov Dec 2020 Feb 2017 2018 2019 2020 Feb
2019 2017—2019 data are reported quarterly, while
10 2020 data are reported monthly.
Singapore’s economic outlook is contingent on the
course the pandemic takes globally.
Economic Exposure to Country
(% Share of Singapore’s Nominal GDP)

Final Demand Export Activity

China 7.0 2.8
US 6.4 0.5
Indonesia 2.6 0.4
India 2.3 0.5
Germany 2.2 1.0
Malaysia 1.8 1.6
UK 1.5 0.3
France 1.3 0.4
Thailand 1.2 0.8
Philippines 1.0 0.4
Italy 0.7 0.2
Spain 0.4 0.1

11
Local containment measures will have a substantial
impact on private consumption.
Share of Private Consumption Expenditure, 2019 (%)

Share of Private
Consumption Impacted by Circuit
Expenditure, 2019 Breaker Measures
(%)
Total Private Consumption Expenditure 100 -
Miscellaneous Goods & Services 18.6 Yes
Housing & Utilities 17.6 No
Transport 13.6 Yes
Recreation & Culture 9.8 Yes
Food Services 7.0 Yes
Health 6.8 No
Food & Non-alcoholic Beverages 6.1 No
Furnishings, Household Equipment & Maintenance 4.0 Yes
Communication 3.9 No
Education 3.7 No
Clothing & Footwear 3.0 Yes
Accommodation Services 2.6 Yes
Alcoholic Beverages & Tobacco 1.6 No
Net Residents' Expenditure Abroad* 1.4 Yes
* Net residents’ expenditure abroad is derived by taking residents’ expenditure abroad minus
non-residents’ expenditure locally. 12
 Labour Market and Inflation
Broadening Disinflationary Pressures

RESTRICTED 13
 Labour market conditions were soft prior to
COVID-19.
Vacancy Rate and Vacancies-To- Labour Market Pressure Indicator
Unemployed Persons Ratio

3.0 1.4 0.4 Tighter labour market relative to

historical average

0.2

No. of Standard Deviations from

2.5 1.2
Vacancy Rate

Historical Average
Per Cent, SA

Ratio, SA
2.0 1.0

-0.2
Vacancies-to-Unemployed
Persons Ratio (RHS)
1.5 0.8
-0.4 More slack in labour
market compared to historical
average

1.0 0.6 -0.6

2017 2018 2019 Q4 2017 2018 2019 Q4
14
 Wages will bear the brunt of the COVID-19 shock
amid higher retrenchments.
Employment by Cluster Total Retrenchments and GDP Growth
104 12 20
GDP (RHS)

Total Excl. Construction and 10 15

103
COVID-Impacted Industries

Employees (Thousand)
Index (Q1 2018=100)

8 10

YOY % Growth
102

6 5

101
4 0

100
2 -5
COVID-Impacted Industries
Retrenchment
99 0 -10
2018 Q2 Q3 Q4 2019 Q2 Q3 Q4 1996 2001 2006 2011 2016 2019
15 Q4
Core inflation turned negative in Q1, reflecting the
early effects of COVID-19.
CPI-All Items and MAS Core Inflation CPI Components Related to Outbound
Travel
2.0
4
Holiday Expenses

1.5
2
MAS Core Inflation
1.0

% YOY
% YOY

0
0.5

-2
0.0 Airfares
CPI-All Items Inflation

-0.5 -4
2017 2018 2019 2020 2017 2018 2019 2020
Mar Q1
16
 Domestic spare capacity will exert downward
pressure on inflation.
Sharp fall in
international travel

Energy Travel-related
Svcs
Slack in domestic Accommodation
Pvte Government measures
economy tpt
ex.
petrol
Non-
CPI Inflation
cooked
food

Retail goods
Other svcs
Prepared
meals

Plunge in oil prices Supply side disruptions

Note: Sizes of segments in the donut chart are proportionate to the weights of labelled components in the 2019 CPI. The colour intensity of the
segments show the extent to which inflation for each component is likely to change in 2020, with red representing categories that will see
declines in inflation and green indicating categories likely to experience an increase in inflation.
17
Disinflationary pressures will broaden in the economy.

Distribution of Annual Price Changes in CPI-All Items and MAS Core Inflation
Core CPI Basket

2019 2020 Forecast 3

40 Forecast

35 MAS Core Inflation

2
Share of Components (Per Cent)

30

25 1 CPI-All Items Inflation

% YOY
20
0
15

10
-1
5

0 -2
<–2 –2 to –1 –1 to 0 0 to 1 1 to 2 >2 2017 2018 2019 2020 Q4
Annual Price Change (Per Cent) 18
 Macroeconomic Policy
Ensuring Medium Term Price Stability

RESTRICTED 19
 Policy affirmed the level of the S$NEER.

106

105
Index (Average for week ending

104
Reduce Slope
3 Jan 2014=100)

103 Reduce
Slightly
Slope
102
S$NEER Increase Slope
Slightly
101
Set Slope to 0%
& Re-centre
100
Downwards
Set Slope
99 to 0%
Reduce
Slope
98
2014 2015 2016 2017 2018 2019 2020
20
 M ONETARY AUTHORI TY OF SI NGAPORE

MACROECONOMIC REVIEW

28 April 2020

ECONOMIC POLICY GROUP

21APRIL 2020/ VOLUME XIX/ ISSUE 1