2022

Country Risk Analysis :

Singapore

GROUP 4
ARUN GANESHAN - 22IB412
DARSHAN KUMAR ASNANI - 22IB420
JOSHLIN JOY - 22IB494
KAPIL PANTH - 22IB435
MUSKAN KHANDELWAL - 22IB446
PALLAVI GAIKWAD - 22IB452
 Introduction

Prior to 50 years ago, Singapore had significant unemployment, inadequate

infrastructure, and a housing scarcity. The city-state is now recognised as one of
the world's most liveable cities, with one of the highest possible levels of human
capital development.

Figure 1: (https://www.allianz-trade.com/en_US/resources/country-reports/singapore.html, n.d.)

As of 2021, Singapore is a high-income economy with a GDP of USD 39,698.69

Crores. The country is one of the most business-friendly regulatory
environments in the world for businesses setup in the country and is one of the
most competitive economies in the world. Apart from its open economy it enjoys
corruption-free government, low unemployment and a per capita income GDP
higher than that of most developed economies. The Singapore economy majorly
depends on its Exports.

Figure 2 & 3: https://www.allianz-trade.com/en_US/resources/country-reports/singapore.html

As a result of the global financial crisis, the economy contracted by 0.6% in 2009,
but has since continued to grow. As Singapore attained high levels of prosperity,
structural development slowed and global demand for exports decreased,
resulting in slower growth from 2012 to 2017 than in the prior decade. In 2017,
growth increased to 3.6% as a result of a strengthening global economy. As per
the IMF, Projected Real GDP (in terms of change in percentage) is 3 % for the
year 2022.

In the most recent World Bank Human Capital Index, Singapore is ranked as
having one of the highest levels of human capital development worldwide. This
indicates that a child born in Singapore today will be 88 percent as productive as
if she had received a thorough education and experienced perfect health. In
addition to substantial financial assistance from the government, the country
continues to enhance the agility and adaptability of its labour force through
initiatives such as Skills future. Government expenditures on continuing
education will almost quadruple, reaching over S$1 billion per year. As a
downside to the above point, though, they have a worryingly old population and
slow job growth. But this does not change the fact that the country is attracting
substantial investments in advanced manufacturing, pharmaceuticals, and
medical technology production, and also that the government is working harder
to consolidate its position as Southeast Asia’s leading financial and technology
hub.

Strength & Weakness

Table 1 - (https://www.allianz-trade.com/en_US/resources/country-reports/singapore.html#link_internal_2, n.d.)

Strength Weakness

● Stable political system and ● High dependence on exports.

effective policymaking, including ● Pressure on productive population
prudent macroeconomic policies. due to high old age dependency
● High-income country that serves ratio.
as a regional and global hub for ● Shift to a mature economy implies
trade with the world’s 2nd busiest slower growth in the medium and
port. long-term.
● Strong external position with a ● Land scarcity as the government
track record of current account seeks to expand population in the
surpluses, ample foreign long run.
exchange reserves, and low
public external debt.
● Strong business environment and
banking sector.
● Strategic position at the heart of
South-East Asia.
 Country Risk Analysis
Macroeconomic Factor
As per Krishna Srinivasan, Director of the IMF’s Asia and Pacific department:
Further supply-chain disruptions, a rise in commodity costs, and a decline in
trade are all potential threats. Singapore’s rapid recovery from the epidemic
outperforms comparable countries, with total production surpassing pre-crisis
levels in one year. However, the comeback has been unequal.

Now, the crisis in Ukraine presents Singapore's policymakers with fresh hurdles
and uncertainties, as Russia's invasion and ensuing sanctions are increasing the
likelihood of weaker economic development and accelerated inflation. Although
it is anticipated that the recovery will continue to be robust, significant
uncertainties cloud the outlook, such as supply-chain disruptions, higher
commodity prices, rising interest rates in the world's most developed
economies, weaker demand from major trading partners such as China, and the
fragmentation of the global economy resulting from the Russia-Ukraine Conflict.

In light of Singapore's robust economic recovery and increasing inflation, the

continued normalisation of all policy pillars remained prudent. The fiscal policy
should continue to normalise gradually over the next two years while
broadening the recovery with targeted help to sectors still affected by the
pandemic. In addition, macroprudential policies should continue to guard
against financial system risks such as vulnerabilities due to property prices that
diverge from fundamentals and growing household and corporate debt in the
context of rising interest rates.

As the epidemic subsides, Singapore's officials have correctly focused their

attention on advancing the shift towards a technologically advanced, more
inclusive, and environmentally friendly economy. In this environment, society is
moving correctly toward a new social contract in which greater communal action
is anticipated but individual accountability is maintained through incentives to
retain individuals in the labour market.

Plans to increase digital adoption and innovation while preserving financial

stability will help Singapore maintain its unique position as a leading regional
innovation centre. While the energy crisis caused by the conflict in Ukraine
reinforces the necessity and urgency of transitioning to renewable energy, it also
makes this transition more difficult under the present energy pricing
environment. So, any unexpected slowdown in the climate agenda must be
made up for in the future by taking swifter and more decisive action to speed up
the transition and help solve one of the biggest problems for the environment in
the 21st century.

(https://www.imf.org/en/News/Articles/2022/08/05/cf-singapore-economy-
rebounded-decisive-policy-action, n.d.)

Political Factor

The political stability index is a measure of the stability of political and

governmental concerns in a nation. It also encompasses political violence. The
political instability index is measured on a scale of -2.5 to 2.5 based on the
intensity of political unrest and violence in each country during a certain year,
with 10 being the best and 0 being the lowest. According to a study conducted
by theglobaleconomy.com using available data from roughly 1996 to 2021 for
the Political Stability Index, Singapore ranked third in the world with a political
stability index of 1.49. This is impressive when compared to other countries, let
alone the country with the highest value, Lichtenstein, at 1.64 points. The same
study also highlighted very low corruption perception in Singapore, with a
corruption perception index of 88 (100 being corruption free). In the corruption
perception index, the country stood at an impressive 5th place. Although
Singapore did not fare as well as the other metrics mentioned above in the civil
liberty index, where it gained a score of 4, where 1 was the best-signalling free
country, Finally, in terms of competitiveness, it ranked first with a score of 84.8.

(https://atlas.bti-project.org/1*2022*CV:CTC:SELSGP*CAT*SGP*REG:TAB, n.d.)
Economic Factor

As per the latest data found on the World Bank's site, Singapore’s GDP
(current USD) stands at 396.99 billion, with GDP growth of 7.6 percent in
comparison to the GDP of the previous year, which had a decrease in GDP
growth rate due to the COVID-19 outbreak. GDP growth rate generally
Hovers around the range of 6 to 9 on average even though it had spike In
some years, such as 2010, with 14.5%, and in others, such as 1998, with -
2.2%, GDP, when adjusted with PPP, stands at 635.27 billion USD.GDP per
capita growth (in annual %) stood out to be 12.2% when compared to -
0.1% and -3.8% in 2019 and 2020 respectively. Unemployment stands at
3.6% of total labour force as on 2021.

As for inflation, throughout 2022, MAS-core inflation will average about

4% and CPI-all items inflation will average around 6%. Taking all factors
into consideration, MAS core inflation should average between 3.5 and 4.5
percent in 2023, while CPI-all items inflation should range between 5.5
and 6.5 percent. Nevertheless, even after eliminating the one-time
impacts of the rise in the GST, core inflation would remain above trend at
2.5–3.5% and headline inflation at 4.5–5.5%. Moreover, there are upside
risks associated with these projections, such as additional shocks to global
commodity prices and the second-round impacts of a protracted period of
high inflation. The ratio of Singapore's government debt to GDP is
anticipated to reach 141.00 percent of GDP by the end of 2022, so
according Trading Economics global macro models and experts' forecasts.

The S$NEER(Singapore dollar nominal effective exchange rate) has risen

significantly over the past three months and is presently close to the top
 of the policy band. The Singapore Interbank Offered Rate (SIBOR) for
three months climbed from 2.5 percent to 3.4 percent in July, whilst
Singapore Overnight Rate Average (SORA) jumped from 2.1 percent to 3.4
percent.

(https://www.mas.gov.sg/news/monetary-policy-statements/2022/mas-monetary-
policy-statement-14oct22#:~:text=For%202022%20as%20a%20whole,inflation%20at
%205.5%E2%80%936.5%25, n.d.)

In FY2022, SINGAPORE is projected to post a budget deficit for the third

consecutive year, with a deficit of S$3.04 billion, or around 0.5 percent of gross
domestic product (GDP). It is believed that macroeconomic developments such
as rising inflation levels could have paved the way for FY2022's deficit. According
to Ministry of Finance (MOF) projections, overall expenditures are projected to
reach S$102,4 billion, an increase of 4.1% or S$4 billion from the revised total
expenditures for FY2021 of S$98,4 billion. Segment-specific operating expenses
for FY2022 are projected to reach S$85,1 billion, up 4.3% from the revised
FY2021 numbers. The updated estimate for ministry expenditures for fiscal year
2022 is $102.4 billion, up from $99.4 billion for fiscal year 2021.

The estimated revenue for 2022 is $81.75 billion, which is $1.39 billion greater
than the revised predictions for 2021.

On the revenue side, operational revenue for FY2022 is projected to be S$81,8

billion, a 1.7% increase above the revised number for FY2021. This is mostly due
to a projected rise in Goods and Services Tax (GST), vehicle quota premiums, and
corporate income tax receipts. These will be largely offset by a decline in stamp
duty revenues.

Compared to the revised statistics for 2021, it is anticipated that fiscal year 2022
would bring in more revenue from business and individual income taxes, the
Goods and Services Tax, and car quota premiums. The Net Investment Returns
Contribution (NIRC) for FY2022 is anticipated to reach $21.56 billion, an increase
of 6 percent.

Environmental factors
The Ministry of the Environment and Anti-Pollution Unit diligently strives to
preserve air quality and some other environmental issues. Transportation-
related pollution is the primary issue in Singapore's metropolitan regions.
Singapore's industrial CO2 emission were one of the world's highest. Singapore
has lost about 30 percent of its mangrove forest cover. Numerous species are
threatened with extinction.

The Water Pollution Control and Drainage Act plays a significant role towards the
regulation of water quality. A significant issue for Singaporeans is that the
country lacks sufficient water to meet their demands. The situation is
exacerbated by industrial wastes like oil that contribute to pollution. Due to a
paucity of water resources, Singapore relies on Malaysia for its water supply.
NEWater, a local brand, provides sewage water that has been purified using dual
membranes. There is a need for further solutions to this challenge. Due to a
paucity of water resources, Singapore relies on Malaysia for its water supply.
NEWater, a local brand, provides sewage water that has been purified using dual
membranes. There is a need for further solutions to this challenge.

Apart from the above-mentioned point there are certain issues like Singapore,
being a low-lying island state, is very vulnerable to sea level rise and coastal
erosion and it is highly prone to industrial pollution due to rapid
industrialisation.

Political factors josh

Singapore's political risk is relatively minimal. According to the Political And Economic Risk
Consultancy (PERC), the nation has the lowest political risk on the continent. This is a
democratic nation. Representatives are elected by the people to lead the nation. They have
valued the relative political environment since gaining independence. Today, stability has
led to peace and an improvement in living conditions. In addition, it has resulted in
enhanced business potential for Singapore.
However, there have been claims of restrictions on opposition parties' free expression in
Singapore. According to others, the benefit of freedom of speech and expression for parties
is constrained. The defamation rules require political opponents to avoid making political
statements that might result in expensive defamation lawsuits or incarceration.

Fear of legal action inhibits opposition groups' ability to express themselves freely in
Singapore. Another aspect is restricted content distribution. These factors dissuade
opposing parties. As a result, the input to activities involving free speech and inter-party
disputes is minimal.

POLITICAL FACTORS (https://howandwhat.net/pestel-analysis-singapore/)

In Singapore, a parliamentary democracy, the Prime Minister serves as head of government
and the President as head of state. One of Southeast Asia's most stable nations is this one. It
belongs to the UN, the Commonwealth, the IMF, the World Bank, ASEAN, APEC, and a few
more illustrious organisations. An essential factor in the success of Singapore's economy has
been the government's concentration on luring foreign direct investment (FDI).

Singapore has excellent ties with China, the USA, and a few other international powers and
highly industrialised nations. It's interesting to note that it also keeps friendly ties with
North Korea. However, due to disagreements over border problems, its relations with
neighbouring nations like Malaysia and Indonesia have occasionally been difficult.

Singapore has had success battling corruption. Singapore is tied with Sweden and Norway
for the fourth-least corrupt country in the world out of 180, according to the Transparency
International Corruption Perceptions Index 2021 ranking. In the previous ten years,
Singapore has been the only Asian nation to be ranked in the top 10. However, the
fundamental freedoms of expression, association, and peaceful assembly are severely
restricted for Singaporeans (Human Rights Watch, 2022). In this regard, it is important to
note that the Singaporean government has dismissed Human Rights Watch's criticisms.

(https://www.hrw.org/world-report/2022/country-chapters/singapore)
The Singaporean government targets critical voices, including activists, bloggers, and
journalists, and pursues legal action against them using unduly strict criminal legislation and
civil defamation lawsuits. The right to assemble is not very free. Lesbian, homosexual,
bisexual, and transgender (LGBT) people's rights are severely restricted, and male on male
sexual activity is still illegal. Legal safeguards against prejudice based on gender identity or
sexual orientation do not exist.
Major political parties and their ideologies:
Since Lee Kuan Yew was elected as Singapore's first prime minister in the 1959 general
election, the People's Action Party (PAP) has had a monopoly on political power in Singapore
(Singapore was then a self-governing state within the British Empire). Since then, only the
PAP has been able to form a government. Singapore joined the Federation of Malaysia in
1963 and, after being ousted, became independent in 1965. Although there are other
political parties in the nation, the People's Action Party and the Workers' Party have always
held the majority of seats in government since 1965.
The Workers' Party and the Progress Singapore Party are the two opposition parties
represented in Singapore's 14th Parliament as of 2020. [50]
Other significant opposition groups, such the Singapore Democratic Party (SDP), Reform
Party, and Singapore People's Party (SPP), are not represented in parliament. With his
victory in a 1981 by-election, J.B. Jeyaretnam of the Workers' Party became the first
opposition party member of parliament in fifteen years. Although opposition parties won a
smaller number of seats in the general elections of 1984 (2 seats of 79), 1988 (1 seat of 81),
1991 (4 seats of 81), 1997 (2 seats of 83), and 2001, they still won an increasing share of the
popular vote—34% total in 2006. (2 seats of 84). The results are lopsided, according to the
opposition parties, who blame the GRC system.

Singapore's great strategic location

Singapore is home to some of the greatest businesses in the world across many industries,
in part because of its position in Southeast Asia. Singapore is ideally situated to access the
region and its expanding consumer market because it is within a six-hour drive of any
Southeast Asian nation.

With more than 7,400 flights to and from Changi Airport every week, it is the second most
linked nation to the rest of the world. It is frequently rated as the best airport in the world
and is home to numerous top logistics companies like UPS and FedEx in addition to serving
more than 100 airlines that fly to roughly 100 different nations and territories worldwide.
The airport has around 62 million visitors each year.

Additionally, for the past 20 years, Singapore's seaport infrastructure has been rated as the
best in Asia. With 200 shipping lines operating through Singapore, the city is connected to
more than 600 ports across the world. More than 130,000 ships call in Singapore each year.

It makes sense that Singapore would be ranked first in Asia for logistics performance in a
global survey of freight forwarders and express carriers conducted by the Logistics
Performance Index, a benchmarking tool produced by the World Bank.
Transfer Risk

When possible, purchasers prefer to execute locally, making Singapore a major

centre for risk transfer in the Asian area.

The political and economic climates are excellent. Corporate payment practices
are positively impacted by a positive business environment. The likelihood of a
corporate default is often relatively low.

Subjective factors

• Terrorism- Global Terrorism Index

According to the Global Terrorism Index Report 2022, Singapore has very low
terrorism rating.
The country is underlined in the image below
Source: https://www.visionofhumanity.org/

• Corruption- Corruption Perception Index.

Corruption is declining in Singapore as we can infer from the line graph given
below
Source: https://www.theglobaleconomy.com

Source: https://tradingeconomics.com

In the 2021 Corruption Perceptions Index (CPI), Singapore tied with Sweden and Norway
for third place with 85 points, matching its performance from the previous year.

It placed fourth overall and first in Asia, behind Denmark, Finland, and New Zealand, all
of which got 88 points.

• Ease of Doing Business

Ease of doing business can be well understood by Index called Business Freedom Index.
Source: https://www.theglobaleconomy.com

As, we can see that ease of doing business in singapore is declining since 2004.

• Human Development Index

The United Nations' Human Development Index for Singapore is a composite indicator
that takes life expectancy, educational attainment, and income level into account. It
tries to gauge both incomes and the quality of life.

Source: https://www.theglobaleconomy.com