Singapore

Population
5,255million

GDP
266,498US$billion

@rating country

Business climate assessment

MAJOR MACRO ECONOMIC INDICATORS

2009 GDP growth (%) Inflation (yearly average) (%) Budget balance (% GDP) Current account balance (% GDP) Public debt (% GDP) (e) Estimate (f) Forecast -0.8 0.6 -0.8 19.0 105.0 2010 14.5 2.8 5.2 22.2 96.3 2011(e) 5.3 3.7 3.2 19.8 93.5 2012(f) 4.3 2.9 3.6 18.5 90.1

STRENGTHS
Very high quality-competitiveness Development of high value-added sectors (chemicals, pharmaceuticals, finance) Large FDI inflows spurred by an advantageous tax regime, political stability and an excellent business environment Major exporter of capital in Asia via the public holding company Temasek

WEAKNESSES
Economy dependent on foreign demand Shortage of skilled labour Aging of the population Latent social tensions in a context of increasing inequality and rising long-term unemployment among the less skilled

RISK ASSESSMENT
Moderate economic slowdown in 2012 After the exceptional rebound in 2010, the Singaporean economy slowed down in 2011 because of tighter economic policies and the slowdown in international trade. This trend is likely to be confirmed in 2012. Exports, which represent 210% of GDP, are expected to stall because of the expected recession in the eurozone and the slowdown in the American economy. The manufacturing sector (electronics, engineering, pharmaceuticals, petrochemicals) will be particularly affected. Nonetheless, steady growth in Asia, and in particular China, is expected to cushion the impact as Singapore sells more and more of the merchandise it produces to its ASEAN neighbours. Besides, the Monetary Authority of Singapore has altered the fluctuation bands for the Singaporean dollar relative to the US dollar in October 2011 to limit its appreciation and prop up export sectors. Moreover, services (financial services, tourism from Asian countries, transport) will again perform well. It is likely that retail sales will also remain dynamic because household consumption is resilient. Lastly, because they have substantial fiscal margins for manoeuvre, the authorities have announced that they will support the economy if there is a sudden downturn in investment or consumption by lowering taxes and implementing

subsidies. Coface monitoring records will likely continue to reflect stable payment behaviour in 2012. Singapore boasts the best record on governance in Asia thanks to an effective legal system that facilitates debt collection and a high degree of financial transparency.

Strong financial position After a reduction in 2011, the fiscal surplus could increase again in 2012 as the authorities have announced that they will use one-off measures to support the economy in the event of a sharp economic downturn. Moreover, although high, public sector debt will remain sustainable as it is essentially domestic. External accounts will remain in surplus in 2012, despite the expected slowdown in exports to Western countries. In this context, foreign exchange reserves have remained high and continue to endow Singapore with the capacity to cope effectively with sudden capital flight. Property prices, meanwhile, were sharply higher in 2011 amid the abundant liquidity resulting from the massive influx of portfolio investments and the expansionary monetary policy. The management of risks associated with the granting of mortgage loans has proven nonetheless to be prudent and in compliance with regulatory requirements. The exposure of banks to the property sector has moreover remained limited. The risks associated with the bursting of the property bubble have thus also remained contained. Lastly, the banking system remains strong thanks to a low rate of non-performing loans, effective supervision and high solvency and liquidity ratios. Basel III regulations will moreover have little effect on a banking system already well-capitalised and regulated.

Stable political position after the May 2011 elections In the political arena, the Peoples Action Party (PAP), which has been in power for 50 years, won the general elections in May 2011. Even though the PAP has a very big majority (81 of the 87 seats) in parliament, the opposition did increase its number of seats slightly. The PAP will in any case be able to stay in power, credited with the governments active policy in dealing with the crisis and maintenance of social stability.

INSOLVENCY TRENDS