IMF: Singapore's financial sector oversight among world's best, but 2019 growth outlook is weaker

Singapore

THE International Monetary Fund (IMF) has reaffirmed Singapore's financial sector oversight to be "among the best globally", and described the country's economic fundamentals as strong, and its economic policies as sound.

This was its third financial sector assessment programme (FSAP) done on Singapore, with the last one done in 2013.

The IMF said the overall sector is resilient, with healthy buffers to withstand severe adverse shocks, the Monetary Authority of Singapore (MAS) said in a statement on Tuesday.

The IMF said Singapore's financial system was resilient even under very adverse scenarios, as demonstrated by stress tests, including that of large-scale global financial market turmoil.

It also noted that MAS' crisis management and resolution regime for distressed financial institutions was strengthened with the introduction of enhanced resolution powers in 2017.

"MAS has the ability to act proactively to address emerging threats to financial stability through the use of macro-prudential policies," it said.

Meanwhile, the IMF lowered its 2019 economic growth forecast for Singapore from 2.3 per cent to 2 per cent on Tuesday.

Singapore's economy grew just 0.1 per cent in the second quarter, its slowest annual pace in a decade, raising possibilities of a recession and monetary policy easing.

Singapore's central bank forecasts growth this year to be between 1.5 per cent and 2.5 per cent, down from 3.2 per cent last year.

"Given global trade tensions, support from external sectors is expected to fall and growth drivers are projected to shift back to domestic demand," the IMF said.

The lower outlooks stems mainly from external sources, including a tightening of global financial conditions, escalation of sustained trade tensions and a deceleration of global growth, it added.

Singapore's economic growth should stabilise at around 2.5 per cent over the medium term, the IMF said, adding that its forecasts were based on discussions with Singapore officials that ended on May 14.

In the area of fintech regulation and supervision, the IMF said in the FSAP that the Singapore central bank has struck a good balance between promoting financial innovation and safeguarding financial stability.

It also found the operations and oversight of the MAS Electronic Payments System (MEPS+) to be compliant with international standards. MEPS+ is a critical payment system used for the settlement of Singapore dollar inter-bank fund transfers, Singapore Government securities and MAS bills.

Singapore, along with 28 other jurisdictions, was assessed by the IMF to be a systemically-important financial hub due to its large and globally connected financial sector. Such jurisdictions are required to undergo a financial stability assessment every five years.

Welcoming the IMF findings, MAS managing director Ravi Menon said: "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."

"But ensuring that regulation and supervision remain relevant is always a 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," he added.