The International Monetary Fund (IMF) has reaffirmed Singapore’s financial sector oversight to be “among the best globally” but has also cut Singapore’s growth forecast.
In its recently completed Financial Sector Assessment Programme (FSAP) for Singapore, IMF noted that the country carries strong economic fundamentals and sound economic policies.
“Overall, the financial sector in Singapore was assessed to be resilient, with healthy buffers to withstand severe adverse shocks,” the IMF said in the report, according to a press release by the Monetary Authority of Singapore (MAS). In addition, Singapore’s financial system is resilient even under very adverse scenarios, as demonstrated by stress tests, including a large-scale global financial market turmoil.
According to the IMF, since its last FSAP review in 2013, MAS has struck a good balance between fostering financial innovation while also strengthening regulatory oversight.
The regulator’s crisis management and resolution regime for distressed financial institutions has been strengthened. It also has the ability to act proactively to address emerging threats to financial stability, said the report.
In the area of FinTech regulation and supervision, MAS has struck a good balance between promoting financial innovation while safeguarding financial stability, the IMF added.
“The FSAP is a rigorous assessment, and we are pleased that it has reaffirmed Singapore’s standing as a sound, stable and well-regulated financial centre,” commented Ravi Menon, Managing Director of MAS.
“But ensuring that regulation and supervision remain relevant is always work-in-progress and we are pleased to have had the opportunity to learn from the IMF’s global experience in financial sector surveillance and analysis.”
Global trade tensions cause IMF to lower growth forecast for Singapore
At the same time, the IMF has trimmed its 2019 economic growth forecast for Singapore from 2.3 percent to 2 percent. This is due to recent global trade tensions hitting exports from the city-state.
According to news reports, Singapore's economy grew just 0.1 percent in the second quarter. With growth at its slowest annual pace in a decade, speculations of a recession and monetary policy easing have been raised.
"Given global trade tensions, support from external sectors is expected to fall and growth drivers are projected to shift back to domestic demand," said the IMF. "Risks to the outlook are tilted to the downside and mainly stem from external sources, including a tightening of global financial conditions, escalation of sustained trade tensions and deceleration of global growth."
The IMF added that the country’s economic growth should stabilise around 2.5 percent over the medium term.