INFLATION
The inflation outlook remains relatively benign. This reflects a number of factors including declining
oil prices, policies aimed at limiting property speculation, and general downward pressure on prices
worldwide. Concerns about the risk of deflation have caused the Monetary Authority of Singapore
(MAS) to announce its intention to intervene in currency markets to slow the long-term appreciation
of the Singapore dollar, thus limiting the deflationary effect of cheaper imports. Notwithstanding the
intervention of the MAS, we still expect inflation to average around 1.7% per annum over the
2015-2019 forecast period, with Retail Price Index trending slightly lower at around 1.0%. Inflation in
the next 12 months is likely to represent the bottom of the inflation cycle at just under 1.0%.
POPULATION
Low population growth, and the broader aging of the population, is a significant issue faced by
Singapore. Singapore’s Government is acutely aware of this, and is implementing a series of
measures to counteract it, including incentives for having children and plans to increase childcare
places. International experience has shown that these policies can work – 10 years ago similar
policies were the forbearer of a significant increase in the fertility rate in Australia.
At the same time, Singapore’s Government needs to balance demands from residents of less inward
migration. In the 2011 election, immigration was a much debated issue. The release of a Government
White Paper in early-2013 calling for high levels of immigration resulted in protests. Many locals are
concerned about the loss of jobs to foreign workers.
The current population is estimated at around 5.47 million (as at June 2014), of which approximately
29.2% are non-residents. How the politics of immigration reform plays out in the next few years is
subject to some conjecture. Singapore’s Government has recently been adopting a more limiting
approach to immigration, with the aim of driving wage and productivity growth. Whilst wages have
increased, productivity growth has lagged behind, raising pressure on business operating costs. It
remains to be seen whether the Singapore’s Government will continue to constrain immigration, or
whether it will accede to pressure to open up again.
Taking these considerations into account, we estimate that growth in the non-resident population will
average around 3.2% (equivalent to 54,000 people) per annum over the next five years. This
compares with average non-resident population growth of 5.4% (equivalent to 72,000 people) per
annum over the past five years. The resident population is likely to grow slower than the non-resident
population, and at a more stable rate. We estimate that it will grow at 0.6% (equivalent to 24,000
people) per annum over the next five years, in line with recent trends. As a result, total population
growth is forecast at 1.4% (equivalent to 78,000 people) per annum, reaching 5.87 million by 2019.
TOURISM
Along with a broader refocusing of the economy towards services, Singapore’s Government remains
intent on growing the number of tourists coming to the city. The Asian tourism market continues to
grow strongly, notwithstanding the sometimes lumpy nature of such growth. Singapore is well-located
to remain a major tourism hub and, in the longer-term, will benefit strongly from growing incomes and
travel habits regionally, particularly in China.
Following a decade of very strong growth in tourism numbers, it was expected that 2014 would see
the first drop in international visitors (excluding Malaysian day trippers) since the GFC. Between 2009
and 2013, visitor numbers increased by 1.5 million per annum, reaching 15.5 million in 2013. This
picture has now changed, with arrivals in 2014 around 500,000 fewer than those in 2013. There has
been a sharp decline in arrivals from China following the anti-corruption drive and restrictions on
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