SINGAPORE - Singapore needs to narrow its huge current account surplus further and the International Monetary Fund supports the government's plans to raise public spending on infrastructure and social services, the IMF said on Thursday.
"Singapore's external position appears to be stronger than warranted by fundamentals, suggesting the importance of further efforts to narrow the current account surplus over the medium term," the IMF said on Thursday in its annual review of economic developments and policies in the wealthy Southeast Asian city-state.
A few IMF directors even felt Singapore should consider tightening monetary policy further by letting the local dollar rise at a faster pace to aid external rebalancing, the fund said.
The IMF, in a separate report, also said Singapore's financial regulation and supervision frameworks were among the best globally, with stress tests indicating its financial institutions would be able to cope in the event of adverse developments such as a sharp drop in property prices.
IMF carries out annual reviews of most member countries. In the case of systemically important jurisdictions such as Singapore, the fund also conducts a thorough financial sector assessment programme once every five years.
Singapore, unlike many developed economies, enjoys huge current account surpluses. This is partly due to the government routinely posting budget surpluses and its success in developing the city-state's wealth-management industry, which has attracted large capital inflows.
Singapore is also Asia's number one foreign exchange trading centre as well as a key Asian base for commodities traders and fund managers.
The island, which has a population of just 5.4 million people, enjoyed a current account surplus of US$51.4 billion (S$64 billion) last year, which was a massive 18.6 per cent of gross domestic product (GDP).