The Republic of Singapore is a metropolitan city-state and island country in Southeast Asia with a total land area of an estimated 714 square kilometres, it is situated at the southern tip of the Malayan Peninsula, between Malaysia and Indonesia and with an economy supported by its growing population of approximately 5.6 million, Singapore rose as an economy in the latter half of the 20th century and today serves as a global commerce, finance, and transportation hub.

According to the World Travel & Tourism Council (WTTC) Travel and Tourism Economic Impact 2018 report, the direct and total contribution of Travel & Tourism to Singapore’s Gross Domestic Product (GDP) was 4.6% and 10.4% respectively, making tourism one of the key supporting industries for the economy.

In 2018, Singapore’s real GDP grew by 3.2%, close to 2017’s growth of 3.5%. Moderate growth in several sectors outweighed a relatively robust growth in information and communications, finance and insurance, business services, wholesale and retail trade, as well as a softer contraction in construction sector. Underpinned by robust arrivals from India, Vietnam and USA, Singapore’s tourism sector achieved the same growth performance as last year, up 6.2% year-on-year (y-o-y) in international visitor arrivals (IVA).

This is further boosted by strong MICE events and corporate demand. In 2018, Singapore’s Changi Airport was awarded the World’s Best Airport by Skytrax for the sixth consecutive year, recognising the airport’s popularity, service excellence and infrastructure.

2018 has been a turbulent year globally, starting on an upbeat note before slowing gradually in the second half. According to the
World Bank, global economic growth is estimated to have moderated at 3.0% with growth forecasts for the next two years projected to be lower. Apart from escalating trade tensions, US federal government shutdown, geopolitical tensions, disorderly
financial market movements and policy agenda of new administrations may contribute to economic uncertainties.

Economic Performance & Outlook

Singapore’s economy ended 2018 stronger than expected, recording a 3.2% real GDP growth for the year. The growth was supported by the manufacturing as well as the finance and insurance sector, which account for 65% of GDP growth. Moving forward, the Economist Intelligence Unit (EIU) forecasts Singapore’s economy growth to soften at 2.7% in 2019 before accelerating from 2021 onwards.

Currency Exchange Outlook

Since April 2018, Monetary Authority of Singapore (MAS) has adopted a tighter policy stance, strengthening the Singapore dollar against the US dollar. EIU expects the Singapore dollar to strengthen further with improving economic conditions from 2021 and gradual appreciation of the nominal effective exchange rate (NEER) before gaining stability at S$1.28:US$1 on average from 2022.

Macroeconomics

While the global economy continues to expand, the second half of 2018 has slowed down against a backdrop of weakening financial market sentiment and trade policy uncertainty. The ongoing US-China trade war remains a key source of risks to Singapore’s economy which is highly dependent on external demand growth.

Inflation

Singapore’s inflation rate lowered to 0.4% y-o-y in 2018 and is expected to remain stable at 0.6%
in 2019. Driven by strong household demand and higher utility prices, EIU expects inflation to rise by an annual average of 1.0% in the next five years.

Interest Rates

In 2018, the 3-month Singapore Interbank Offered Rate (SIBOR) rose by 0.38 percentage points in parallel with the US Federal Reserve’s (Fed) interest rate hikes. The Fed raised interest rates four times in 2018 on the back of solid economic expansion in the US. However, the probability of two interest rates hikes in 2019 has declined considerably due to a more cautious stance in light of a significant escalation of trade tensions.

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About Xin Kok

Kok Xin is an Analyst with HVS Singapore. She graduated from Glion Institute of Higher Education with a Bachelor of Arts in Hospitality Real Estate Finance and Revenue Management. Since joining, she has been engaged in numerous market research, feasibility studies and valuations in the Asia Pacific region that include Indonesia, Malaysia, Papua New Guinea and Singapore. For further information, please contact: xkok@hvs.com

About Chloe Pang

Chloe Pang is an Analyst with HVS Singapore. She graduated from École hôtelière de Lausanne with a Bachelor of Science in International Hospitality Management with Honours. Since joining, she has been engaged in market research, feasibility studies, and valuations in the Asia Pacific region that include Indonesia, Malaysia, Papua New Guinea, and SIngapore. For further information, please contact: cpang@hvs.com

About Hok Yean CHEE

Hok Yean CHEE is the Regional President of HVS Asia Pacific. She has 30 years of experience in more than 30 markets across 19 countries in Asia Pacific, providing real estate investment advisory services for a wide spectrum of property assets. Her forte lies in providing investment advisory on hotels and serviced apartments including brokerage, strategic analyses, operator search, market feasibility studies, valuations and litigation support. For further information, please contact: hychee@hvs.com