Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Cross Asset Strategy

<ul>
<li>PM Lawrence Wong led the PAP to a bigger victory than in 2020, winning 87 of the 97 seats, and 65.6% of votes in contested seats (vs 61.2% in 2020). </li>
<li>Since one 5-member seat (Marine Parade-Braddell Heights GRC) was won uncontested (while all seats were contested in 2020) the vote share figures aren't strictly comparable between 2020 and 2025. </li>
<li>Nonetheless, the larger proportion of votes and seats won by PAP give the PM a freer hand in making and implementing policy with a seemingly stronger mandate. Positive for Singapore. </li>
</ul>


PM Lawrence Wong led the PAP to a bigger victory than in 2020, winning 87 of the 97 seats, and 65.6% of votes in contested seats (vs 61.2% in 2020). 
Since one 5-member seat (Marine Parade-Braddell Heights GRC) was won uncontested (while all seats were contested in 2020) the vote share figures aren't strictly comparable between 2020 and 2025. 
Nonetheless, the larger proportion of votes and seats won by PAP give the PM a freer hand in making and implementing policy with a seemingly stronger mandate. Positive for Singapore. 


Singapore: Lawrence Wong Boosted by Mild Improvement in PAP Vote Share

Macroeconomics

<ul>
<li>As we had forecast in Sep'24, the S$NEER has depreciated since the Oct'24 policy statement (despite officially unchanged policy). SS$NEER likely to depreciate further, with SGD reaching S$1.39/US$ by end-Mar'25. </li>
<li>The productivity rebound, bolstered by 10%YoY growth in machinery investment in Q3/24, enabled ULCs to moderate, rising just 0.9%YoY economy-wide (slowest in 4 years), helping contain headline and core inflation.</li>
<li>We expect inflation to remain below 2%YoY in 2025, while real GDP grows 3.2% (above the government's "1 to 3%" growth forecast), driven by investment and productivity growth in H1.</li>
</ul>


As we had forecast in Sep'24, the S$NEER has depreciated since the Oct'24 policy statement (despite officially unchanged policy). SS$NEER likely to depreciate further, with SGD reaching S$1.39/US$ by end-Mar'25. 
The productivity rebound, bolstered by 10%YoY growth in machinery investment in Q3/24, enabled ULCs to moderate, rising just 0.9%YoY economy-wide (slowest in 4 years), helping contain headline and core inflation.
We expect inflation to remain below 2%YoY in 2025, while real GDP grows 3.2% (above the government's "1 to 3%" growth forecast), driven by investment and productivity growth in H1.


Singapore: Early to Ease Amid Receding Inflation, Helped by Productivity Rebound

<ul>
<li>After 8 quarters of employment-led growth, productivity grew 1.5%YoY in Q2CY24, as machinery investment grew 3.8%YoY. The large pipeline of unfulfilled investment commitments from 2022 should boost machinery investment further. </li>
<li>NODX rebounded to 13.2%YoY growth (16.1%YoY volume growth) in Jul-Aug'24, and the BoP current account surplus was 20% of GDP in H1CY24. As productivity accelerates, inflation will moderate. </li>
<li>We expect real GDP to grow 3.7% in 2024. But lower inflation will allow S$NEER's pace of appreciation to be reduced (Oct'24) and S$NEER re-centered lower (Mar'25). Bullish. </li>
</ul>


After 8 quarters of employment-led growth, productivity grew 1.5%YoY in Q2CY24, as machinery investment grew 3.8%YoY. The large pipeline of unfulfilled investment commitments from 2022 should boost machinery investment further. 
NODX rebounded to 13.2%YoY growth (16.1%YoY volume growth) in Jul-Aug'24, and the BoP current account surplus was 20% of GDP in H1CY24. As productivity accelerates, inflation will moderate. 
We expect real GDP to grow 3.7% in 2024. But lower inflation will allow S$NEER's pace of appreciation to be reduced (Oct'24) and S$NEER re-centered lower (Mar'25). Bullish. 


Singapore: Productivity-Led Cyclical Recovery Will Dampen Inflation, Ease Policy

Real GDP will likely grow 6.5% in 2021, pushing CPI inflation above 2%YoY by mid-year. The monetary stance will officially tighten (to "gradual appreciation of the S$NEER") in October 2021. Given excess supply of residential and commercial property, we expect downward pressure on property prices, and hence recommend being Underweight Singapore equities, but long the SGD. Manufacturing production grew 11.1% YoY in 1Q 2021 (much faster than the 7.5% estimate in the Advance Estimate of GDP announced on 14 April), so real GDP is likely to have grown at least 1.2% YoY in 1Q 2021. Non-oil domestic exports (NODX) grew 9.7% YoY in 1Q 2021, the strongest in the last 4 quarters. Helped by the low-base (-13.3% YoY in 2Q 2020), real GDP is likely to grow at least 12% YoY in 2Q 2020, and a further 6% YoY in 2H 2021 -- ensuring real GDP growth of 6.5% in 2021, faster than the official forecast of "4 to 6%" growth this year. The unemployment rate has fallen to 2.9% in March 2021, above the average of the past decade, but below the levels that prevailed in 1998-2001, 2003-06 and 2009. With tourism-facing sectors unlikely to restore jobs, the effective "full employment" level for the rest of the economy is an unemployment rate of 2.5%, which will be reached by mid-2021. CPI inflation is already at 1.3%, the highest since May 2017, and will likely exceed 2% YoY by June, and stay above those levels for the rest of 2021. We expect the S$NEER to trade at the top of its policy band (about 2% above this month's level) by 3Q 2021, and the official policy stance to be amended to "gradual appreciation of the the S$NEER" at the next policy announcement in October 2021. The effective tightening of monetary conditions will be negative for the equity market. Excessive property supply will exert downward pressure on residential and commercial property prices, hurting prospects for the property sector. We recommend being long the currency (SGD) but underweight Singapore equities on a 6-9 month view. The setback to the leadership transition (with Heng Swee Keat stepping down as PM-in-waiting) is a medium-term concern. But Lawrence Wong as FM, with PM Lee continuing for longer, ensures policy continuity that will underpin the near-term growth outlook.

Real GDP will likely grow 6.5% in 2021, pushing CPI inflation above 2%YoY by mid-year. The monetary stance will officially tighten (to "gradual appreciation of the S$NEER") in October 2021. Given excess supply of residential and commercial property, we expect downward pressure on property prices, and hence recommend being Underweight Singapore equities, but long the SGD. Manufacturing production grew 11.1% YoY in 1Q 2021 (much faster than the 7.5% estimate in the Advance Estimate of GDP announced on 14 April), so real GDP is likely to have grown at least 1.2% YoY in 1Q 2021. Non-oil domestic exports (NODX) grew 9.7% YoY in 1Q 2021, the strongest in the last 4 quarters. Helped by the low-base (-13.3% YoY in 2Q 2020), real GDP is likely to grow at least 12% YoY in 2Q 2020, and a further 6% YoY in 2H 2021 -- ensuring real GDP growth of 6.5% in 2021, faster than the official forecast of "4 to 6%" growth this year. The unemployment rate has fallen to 2.9% in March 2021, above the average of the past decade, but below the levels that prevailed in 1998-2001, 2003-06 and 2009. With tourism-facing sectors unlikely to restore jobs, the effective "full employment" level for the rest of the economy is an unemployment rate of 2.5%, which will be reached by mid-2021. CPI inflation is already at 1.3%, the highest since May 2017, and will likely exceed 2% YoY by June, and stay above those levels for the rest of 2021. We expect the S$NEER to trade at the top of its policy band (about 2% above this month's level) by 3Q 2021, and the official policy stance to be amended to "gradual appreciation of the the S$NEER" at the next policy announcement in October 2021. The effective tightening of monetary conditions will be negative for the equity market. Excessive property supply will exert downward pressure on residential and commercial property prices, hurting prospects for the property sector. We recommend being long the currency (SGD) but underweight Singapore equities on a 6-9 month view. The setback to the leadership transition (with Heng Swee Keat stepping down as PM-in-waiting) is a medium-term concern. But Lawrence Wong as FM, with PM Lee continuing for longer, ensures policy continuity that will underpin the near-term growth outlook.  

Singapore's Strong Rebound Will Raise Inflation, Strengthening SGD in 2H 2021

The FY2021 Budget is unequivocally contractionary, with the fiscal deficit likely to contract from 4.5% of GDP in FY2020 (our estimate) to 3% in FY2021, with the overall fiscal position (including Special Transfers and Net Investment Return Contributions) going from a 13% of GDP deficit in FY2020 to near-balance in FY2021. Although real GDP should rebound to 6% growth in 2021, the glut of supply in the the residential property sector is likely to depress prices as global liquidity conditions tighten this year. We recommend being Underweight Singapore, but with relatively de-leveraged <a href="https://www.smartkarma.com/entities/singapore-airlines-ltd" target="_blank" data-smartkarma-citation="entities:74:1" rel="noopener">SIA (SIA SP)</a> well positioned to benefit disproportionately in its sector. Apart from the 8.8% YoY increase in total government spending, the Budget for FY2021 was solidly contractionary, with the fiscal deficit (operating revenue minus operating &amp; development expenditure) projected to decline from an estimated 6% of GDP (S$29.45 billion) in FY2020 to 5.1% (S$25.7 billion) in FY2021. Given that the actual fiscal deficit in Apr-Dec 2020 was only S$12.39 billion, and government revenue grew 17.3% YoY in Oct-Dec 2020 (even with real GDP still down 2.4% YoY), we estimate that the deficit for FY2020 will eventually be only 4.5% of GDP (as the economy returns to YoY growth in the Jan-Mar 2021 quarter). And the deficit for FY2021 will likely be about 3% of GDP, as the economy grows 6% in 2021, boosting government revenue further. The overall fiscal deficit (including the impact of Special Transfers and Net Investment Returns  Contributions) is officially projected to contract from 13% of GDP in FY2020 to 2.2% of GDP in FY2021, but we estimate that this overall balance will be largely balanced in FY2021. Given the extremely low base from March-December 2020 (except for manufacturing), real GDP should begin growing in the current quarter, and easily achieve 6% growth for all of 2021. Since tourist arrivals were near zero in 2Q 2020, they too will be "growing" YoY, although the pain in all tourism-related sectors will persist through 2021. So the FY2021 Budget focused on vaccination and further strengthening healthcare infrastructure, continued support to the aviation and tourism-related sectors, and incentives for employers to retain Singapore-resident employees. The latter has already borne results, with net employment of residents increasing slightly even in the 2020 recession; with many of the 195,900 foreigners laid off being obliged to leave Singapore (and hence its labour force) the unemployment rate moderated to 3.2% by 4Q 2020. With a leaner work force, 2021 will see a strong productivity-led recovery (good for Singapore's main employers, MNCs and GLCs). The manufacturing rebound from 2020 will likely be sustained through 2021; but after this year's 6% real GDP growth, Singapore will return to its recent trend of 2.5-3% annual growth. With global liquidity conditions likely to turn less favourable, the glut of residential property is likely to exert some downward pressure on residential prices in 2021. We recommend staying Underweight Singapore. <a href="https://www.smartkarma.com/entities/singapore-airlines-ltd" target="_blank" data-smartkarma-citation="entities:74:1" rel="noopener">SIA (SIA SP)</a> is likely to be a winner from the fiscal measures: it has cut its workforce by 20%, will receive subsidies for the rest of its workforce until at least September 2021, and will have a relatively less leveraged balance sheet than its global peers when the carnage ends, and be well-positioned strategically to benefit disproportionately once the global tourism industry begins a genuine recovery.

The FY2021 Budget is unequivocally contractionary, with the fiscal deficit likely to contract from 4.5% of GDP in FY2020 (our estimate) to 3% in FY2021, with the overall fiscal position (including Special Transfers and Net Investment Return Contributions) going from a 13% of GDP deficit in FY2020 to near-balance in FY2021. Although real GDP should rebound to 6% growth in 2021, the glut of supply in the the residential property sector is likely to depress prices as global liquidity conditions tighten this year. We recommend being Underweight Singapore, but with relatively de-leveraged SIA (SIA SP) well positioned to benefit disproportionately in its sector. Apart from the 8.8% YoY increase in total government spending, the Budget for FY2021 was solidly contractionary, with the fiscal deficit (operating revenue minus operating &amp; development expenditure) projected to decline from an estimated 6% of GDP (S$29.45 billion) in FY2020 to 5.1% (S$25.7 billion) in FY2021. Given that the actual fiscal deficit in Apr-Dec 2020 was only S$12.39 billion, and government revenue grew 17.3% YoY in Oct-Dec 2020 (even with real GDP still down 2.4% YoY), we estimate that the deficit for FY2020 will eventually be only 4.5% of GDP (as the economy returns to YoY growth in the Jan-Mar 2021 quarter). And the deficit for FY2021 will likely be about 3% of GDP, as the economy grows 6% in 2021, boosting government revenue further. The overall fiscal deficit (including the impact of Special Transfers and Net Investment Returns  Contributions) is officially projected to contract from 13% of GDP in FY2020 to 2.2% of GDP in FY2021, but we estimate that this overall balance will be largely balanced in FY2021. Given the extremely low base from March-December 2020 (except for manufacturing), real GDP should begin growing in the current quarter, and easily achieve 6% growth for all of 2021. Since tourist arrivals were near zero in 2Q 2020, they too will be "growing" YoY, although the pain in all tourism-related sectors will persist through 2021. So the FY2021 Budget focused on vaccination and further strengthening healthcare infrastructure, continued support to the aviation and tourism-related sectors, and incentives for employers to retain Singapore-resident employees. The latter has already borne results, with net employment of residents increasing slightly even in the 2020 recession; with many of the 195,900 foreigners laid off being obliged to leave Singapore (and hence its labour force) the unemployment rate moderated to 3.2% by 4Q 2020. With a leaner work force, 2021 will see a strong productivity-led recovery (good for Singapore's main employers, MNCs and GLCs). The manufacturing rebound from 2020 will likely be sustained through 2021; but after this year's 6% real GDP growth, Singapore will return to its recent trend of 2.5-3% annual growth. With global liquidity conditions likely to turn less favourable, the glut of residential property is likely to exert some downward pressure on residential prices in 2021. We recommend staying Underweight Singapore. SIA (SIA SP) is likely to be a winner from the fiscal measures: it has cut its workforce by 20%, will receive subsidies for the rest of its workforce until at least September 2021, and will have a relatively less leveraged balance sheet than its global peers when the carnage ends, and be well-positioned strategically to benefit disproportionately once the global tourism industry begins a genuine recovery. 

Singapore Budgets for a Return to Normalcy Outside the Key Travel-Related Sectors

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Singapore Treasury (SINGAPORE GOVT)

Singapore: Early to Ease Amid Receding Inflation, Helped by Productivity Rebound

Strong productivity growth reduces ULCs & inflation. S$NEER likely to depreciate further, inflation to stay below 2% in 2025, with RGDP growth of...

Prasenjit K. Basu

Singapore: Productivity-Led Cyclical Recovery Will Dampen Inflation, Ease Policy

Productivity is accelerating amid a machinery investment-led cyclical rebound. ULCs & inflation are declining, even as RGDP accelerates to 3.7%...

Prasenjit K. Basu

Singapore's Strong Rebound Will Raise Inflation, Strengthening SGD in 2H 2021

Real GDP likely grew 1.2% YoY in 1Q, & will grow 6.5% in 2021. CPI inflation will exceed 2% by mid-year, causing MAS to tighten policy in Oct21. We...

Prasenjit K. Basu

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Singapore: Lawrence Wong Boosted by Mild Improvement in PAP Vote Share

​PM Lawrence Wong led PAP to a bigger victory, winning 87 of 97 seats and 65.6% of votes, giving him a stronger mandate for policy-making. WP (a...

Prasenjit K. Basu

Singapore: Early to Ease Amid Receding Inflation, Helped by Productivity Rebound

Strong productivity growth reduces ULCs & inflation. ​S$NEER likely to depreciate further, inflation to stay below 2% in 2025, with RGDP growth of...

Prasenjit K. Basu

Singapore: Productivity-Led Cyclical Recovery Will Dampen Inflation, Ease Policy

​Productivity is accelerating amid a machinery investment-led cyclical rebound. ULCs & inflation are declining, even as RGDP accelerates to 3.7%...

Prasenjit K. Basu

Singapore's Strong Rebound Will Raise Inflation, Strengthening SGD in 2H 2021

Real GDP likely grew 1.2% YoY in 1Q, & will grow 6.5% in 2021. CPI inflation will exceed 2% by mid-year, causing MAS to tighten policy in Oct21. We...

Prasenjit K. Basu

Singapore Budgets for a Return to Normalcy Outside the Key Travel-Related Sectors

Despite an 8.8% YoY increase in total spending, the fiscal impulse will be contractionary in FY2021. Real GDP will grow 6%, but stay Underweight,...

Prasenjit K. Basu

PM Lawrence Wong led PAP to a bigger victory, winning 87 of 97 seats and 65.6% of votes, giving him a stronger mandate for policy-making. WP (a...

Strong productivity growth reduces ULCs & inflation. S$NEER likely to depreciate further, inflation to stay below 2% in 2025, with RGDP growth of...

Productivity is accelerating amid a machinery investment-led cyclical rebound. ULCs & inflation are declining, even as RGDP accelerates to 3.7%...