Singapore

Slower economic momentum

The Singapore economy’s expansion strengthened in 2024, driven by an upturn in exports and resilient domestic demand. But this high dependence on global demand indicates that the pace of Singapore’s growth is expected to slow in 2025. Trade is vital to Singapore and accounts for over three-and-a-half times the size of its economy. Weaker growth in major trading partners (particularly the US and China) and aggressive US tariff policies would damp the economic prospects of Singapore’s trade-related sectors. It would curb manufacturing activity (21% of GDP), which rebounded 3.5% in 2024. Slower international trade will also weigh on services exports such as transportation services (32% of services exports in 2023). Growth support should come from a broadening of the global tech cycle beyond the AI-related demand boom to consumer devices, as well as the gradual easing of financial conditions. These factors will benefit the key sectors of electronics and financial services. Tourism, a sector that contributes 3-4% to Singapore’s GDP, is set to make a larger contribution in 2025 according to the Singapore Tourism Board. Visitor arrivals reached 90% of the pre-Covid average in 2024, indicating room for further recovery.

Unemployment should remain low even as the domestic labour market continues to ease. Sustained economic growth would support job creation in 2025. This would help keep household demand stable.

Inflation is expected to slow further in 2025 as cost pressures remain contained. Additional government subsidies for childcare, healthcare, public transport, and utilities, alongside cash assistance under the enhanced Assurance Package will continue to temper the impact of higher prices that households face. The Monetary Authority of Singapore maintained a tight SGD Nominal Effective Exchange Rate  (NEER) policy stance throughout 2024 since its last tightening move in October 2022. While easing its monetary policy would be the logical next step, ongoing external uncertainty and concerns over US tariff plans keep a high bar in place regarding any easing move.

Fiscal and external accounts remain strong

Singapore enjoys a strong external position. The current account surplus will continue to be large in 2025, even if its share of GDP is expected to narrow. This projected narrowing is driven by a wider primary income deficit, which reflects increased foreign investment into Singapore. Smaller goods and services surpluses amid an expected trade slowdown also contribute to a slimmer current account surplus. On the back of this durably large current surplus, foreign reserves remain at an adequate level (9.4 months of imports in November 2024). Over the medium term, Singapore’s current account surpluses are forecast to narrow on the back of increased infrastructure and social spending.

Following a large fiscal deficit in 2020 due to Covid-related expenditure, the government broadly balanced its budget through to 2024 as the economy recovered. However, fiscal spending pressures have continued to mount. The average annual fiscal expenditure in the post-Covid era (2021-24) has been 40% higher than pre-Covid (2016-19). The government introduced a suite of revenue measures in 2022 to meet this increase in spending. The moves included a two-step rise in the Goods and Services Tax (GST), increases in top marginal personal income tax rate and residential property tax rate, and additional registration tax for luxury cars. They also introduced the Significant Infrastructure Government Loan Act (SINGA) to permit debt-financed capital expenditure. Prime Minister and Finance Minister Lawrence Wong said the government expect the medium-term fiscal position to remain roughly balanced until 2030. For FY2024, Singapore achieved an overall budget surplus of 0.4% of GDP after two years of deficit. In 2025, the government estimates another fiscal surplus of 0.4% of GDP. The 2025 Budget, which was tabled on 18 February, addressed cost of living pressures and featured long-term efforts to raise productivity and enhance competitiveness. These long-term measures include top-ups to existing funds such as National Productivity Fund, Changi Airport Development Fund, and Future Energy Fund. Near-term measures to alleviate cost pressures include financial assistance (CDC vouchers, SG60 vouchers, utilities rebates). Facing multiple medium- and long-term fiscal challenges, the government will continue allocating significant resources to tackle challenges such as the rapidly ageing population, boosting productivity, risks from climate change, rejuvenating and expanding housing and infrastructure.

While public debt is high on paper, it is used to create a domestic safe asset market and is mainly composed of long-term bonds and securities. In addition, large reserves built up in the past from previous fiscal surpluses and investment returns (200-300% of GDP) can be used to fund any rare budget deficits. The banking sector is significantly exposed to real estate, with 35.5% of outstanding domestic business loans dedicated to real estate, land development, and construction. The banking sector’s NPL ratio rose to a high of 1.77% in the second quarter of 2024, i.e., higher than that for overall commercial bank loans (1.58%), mostly involving the construction sector. That said, capital and liquidity buffers remain strong and above regulatory requirements.

Fresh term for the ruling party in the upcoming polls

Finance Minister Lawrence Wong became the fourth Prime Minister of Singapore on 15 May 2024, taking over from long-serving Lee Hsien Loong. Both men belong to the People’s Action Party (PAP), which has ruled the country since it gained independence in 1965 and remains the dominant ruling party in Singapore’s politics. The PAP enjoys a large parliamentary majority, holding around 75% of seats. The unicameral Parliament of Singapore allows a maximum of 105 members of parliament (MPs), of whom 93 are elected, and 12 of whom are non-constituent MPs. In the last election in 2020, the PAP’s popular vote share fell from nearly 70% to 61.2%, and Workers’ Party (WP), the main opposition party, gained a second group representation constituency (GRC). Singapore’s next general election must be held by November 2025 and will be the first in nearly 20 years without former PM Lee Hsien Loong at the helm, so it is perceived as a report card for the next generation of leaders (so-called 4G leaders). The high-profile court cases of former transport minister Subramaniam Iswaran (PAP) and WP chief Pritam Singh may have affected the reputation of both the ruling and opposition parties, but they are likely to be overshadowed by key economic issues for voters such as the cost of living, housing and jobs.

Singapore occupies a unique position in balancing ties between the US and China within the Southeast Asian region. The small state has maintained close economic and political ties with both superpowers, but may find it increasingly challenging to navigate the growing competition between the US and China amid rising global geopolitical tensions. As close neighbours, Singapore and Malaysia have a long-standing and multifaceted relationship, with robust ties involving bilateral trade, investment and tourism. Both countries recently signed an agreement on the Johor-Singapore Special Economic Zone (JS-SEZ), which aims to improve cross-border business and connectivity. The JS-SEZ will unite Singapore’s strength as a business and financial hub and the state of Johor’s abundant land, energy and labour supply resources.

Payment

Cheques, cash and bank transfers are all frequently-used means of payment within Singapore. Bank transfers, fast and secure, are widely used for international transactions. Standby Letters of Credits and Irrevocable Letters of Credit are often used in export transactions.

Debt Collection

Amicable phase

The amicable phase begins with the seller contacting buyers in writing, by telephone and, where permissible, by visiting the buyer’s business premises. If there is no response from the buyer, a site visit and online searches are conducted to ascertain the operating and legal status of the buyer. If the buyer does not make attempts to settle the matter amicably, legal proceedings can be used to recover payments for goods sold and delivered in Singapore. It is, however, prudent to ensure that the buyer has sufficient assets to satisfy the debt before proceedings are initiated.

Legal proceedings

Singapore is a common law jurisdiction. Its laws are principally governed by Supreme Court of Judicature Acts, State Court Acts, other statutes which have procedural application (or contain procedural provisions), the Rules of Court, practice directions, case law and the court’s inherent?powers.

Singapore’s courts comprise State (Subordinate) Courts and the Supreme Court. The Supreme Court is composed of the High Court and the Court of Appeal (the final appellate court). The High Court is a court of first instance, generally used for claims beyond the jurisdiction of the State Courts (although the High Court is a court of unlimited jurisdiction and may hear any claim).

Default Judgment

If a defendant fails to enter an appearance or fails to file a defence within the time specified in the writ, the plaintiff may enter default judgment against him. This can be a final judgment or an interlocutory judgment, depending on the nature of the claim.

Summary Judgment

If the defendant has entered an appearance and filed a defence, but it is clear that the defendant has no real defence to the claim, the plaintiff can apply to court for summary judgment. To avoid summary judgment being entered, the defendant must show that the dispute concerns a triable issue, or that there is some other reason for trial. An application for summary judgment must be filed within 28 days of pleadings being concluded (unless the court orders otherwise).

Enforcement of a Legal Decision

WRITS OF EXECUTION

A judgment can be enforced by a variety of writs of execution. These include a Writ of Seizure and Sale of movable and immovable property, a Writ of Delivery and a Writ of Distress. These writs authorise court officials to take appropriate measures to give effect to the judgment.

GARNISHEE PROCEEDINGS

This can be an appropriate solution when the debtor is owed a debt by a third party (the garnishee). When the creditor garnishes the debt, the garnishee must then make payments due to him, rather than to the debtor. To collect these debts, the creditor must first apply for a garnishee order nisi. This can be filed without the involvement of other parties and leads to “show cause” proceedings. If the garnishee confirms that there are monies due and owing to the judgment debtor at this stage, the Registrar may proceed to make the garnishee nisi?absolute.

REGISTRATION OF JUDGMENT

If the creditor is not able to enforce his judgment in Singapore, he may be able to enforce it in a country where the debtor holds assets. This can be done by commencing fresh proceedings, or by registering the Singapore judgment in the foreign country (on the basis of reciprocity of enforcement between the two countries).

Insolvency Proceedings

SCHEMES OF ARRANGEMENT

Schemes of arrangement begin with an application to court, for an order summoning one or more meetings of the creditors, members of the company, or shareholders of the company. If the court agrees to the order, a proposal must then be tabled before the relevant meetings and approved by the requisite majority (unless the court orders otherwise) of the creditors, class of creditors, members or class of members, shareholders, or class of shareholders.

JUDICIAL MANAGEMENT

When a company is in financial difficulty but has reasonable prospects of being rehabilitated, or if preserving all or part of its business as a going concern (or even that the interests of creditors would be better served than by resorting to a winding up), the company or its creditors can apply to court for an order that the company be placed under the judicial management of a judicial manager.

LIQUIDATION

If an insolvent company is unable to overcome its difficulties, it can be dissolved. This enables the liquidation of its assets, so that creditors can be repaid, at least in part. This process is known as winding up or liquidation. A healthy company can also be subject to winding up if its members no longer wish the business to continue. When a company is wound up, its assets or proceeds are first used to pay off any creditors. Following this, any balance remaining is distributed pro rata amongst shareholders.

Last updated:January 2025