Outlook for 2011-15

• The Economist Intelligence Unit expects the People's Action Party (PAP) to remain in power during the forecast period. However, the party will face difficulties as it strives to maintain popular support.
• The next general election must be held by February 2012, but speculation over the possibility of an early poll has intensified. Whenever it is held, the PAP is expected to win a hefty parliamentary majority.
• Singapore's fiscal stance is expected to tighten in 2011-15 as the government maintains its countercyclical approach to policymaking.
• The economy is expected to resume a sustainable growth path in 2011-15, following a mild recession in 2009 and a strong rebound in 2010. Real GDP growth will average 5% a year in the forecast period.
• In part owing to recent changes in the policy stance of the Monetary Authority of Singapore (the central bank), the Singapore dollar will remain strong during the forecast period, helping to calm inflationary pressures.
• The current account will continue to post large surpluses in 2011-15, owing to healthy surpluses on the merchandise trade account.

Monthly review

• With an election expected to be held this year, the PAP had an opportunity to woo voters with its budget for fiscal year 2011/12 (April-March). The finance minister, Tharman Shanmugaratnam, did not disappoint.
• The budget contained a number of measures aimed at helping poorer households. Mr Shanmugaratnam said that families on the Workfare Income Supplement scheme would receive a "special bonus" payment.
• Real GDP expanded by 12% year on year in the fourth quarter of 2010. The growth rate was slightly lower than suggested by the advance estimate from the Ministry of Trade and Industry that had been released during the quarter.
• Inflation accelerated again in January, with consumer prices rising by 5.5% year on year, up from 4.6% in December.
• Singapore's tourism sector is booming. According to the Singapore Tourism Board, a government agency, the number of visitors arriving in the city state rose by 20.2% in 2010 to a record 11.6m.
• The balance-of-payments surplus (before official financing) rose to S$16.5bn (US$12.7bn) in the fourth quarter, up from S$6.3bn in the third quarter, taking the surplus for the year as a whole to S$57.5bn.

Although the ruling People's Action Party (PAP) could face challenges to its authority and popularity during the forecast period, it will remain Singapore's dominant political force. Throughout its long period in government, the PAP has managed to deliver rising prosperity and promote social harmony through a paternalistic approach, and its far-sighted policies have contributed to the building of a successful and relatively harmonious multicultural society that enjoys a high standard of living, with good amenities, education, healthcare, housing and transport. In many ways, therefore, the Singaporean people have entered into an implicit contract with the PAP, according to which they accept the party's political dominance in return for a high standard of living.

The timely implementation of policies that limited the local effects of the 2008­09 global economic downturn, and the recent generous budget for fiscal year 2011/12 (April-March), are likely to have put the PAP in an even stronger position ahead of the next election, which is due by early 2012 but now appears likely to be held ahead of schedule. The ruling party will campaign on the basis that it has the experience and expertise to lead the country during bad times as well as good. Moreover, given that its political opponents are weak and subject to repression by the government, the PAP is expected to retain its stranglehold on power for the foreseeable future. Nevertheless, the electorate's disgruntlement about a number of issues could grow. An important potential source of popular discontent is the large number of foreign workers in the country, both low-skilled and professional. The government is trying to address these concerns: it says that immigration at current levels cannot continue, and has raised the levy imposed on foreign workers. The prime minister, Lee Hsien Loong, has said that the government will "manage and moderate" the inflow of foreign workers. However, he has also conceded that it remains necessary for Singapore to welcome "hard-working" foreigners in order to expand the country's pool of talent and compensate for its low birth rate. There is a clear political aspect to this question, as electioneering by both the PAP and opposition parties has forced the issue out into the open.

The PAP has other weaknesses that could threaten its position. The prime minister's father, Lee Kuan Yew, the minister mentor, who has been a dominant influence on Singapore's development during his political career, is still a major unifying force in the PAP. His eventual death-he is 87 years old-could trigger change, especially if rivalries surface within the party or if the Lee family's political dominance diminishes. Such developments could also lead to a more meaningful debate about how much political freedom should be permitted in the city state.

The current leadership appears to be aware of the potential struggle that it faces to hold on to power in the long term: the prime minister has said that the main challenge will be to institute a political system that will function effectively for generations to come. In an apparent bid to respond to demands for greater political participation and to convey the impression that the government is in tune with the electorate's growing political aspirations, Mr Lee has overseen reforms which guarantee that the next parliament will contain at least 18 non-PAP members. The changes to the constitution, which were pushed through in July last year, include increasing the allowable number of non-constituency members of parliament (NCMPs, who are in practice the best-performing losers among opposition candidates) from six to nine, and making permanent the system under which there are a number of nominated members of parliament (NMPs) who are chosen for their non-partisan and alternative views.

There will also be an increase in the number of single-seat constituencies and a reduction in the size of group representation constituencies (GRCs) at the next election. The reduction in the size of GRCs would make the system marginally more democratic, as it would give opposition members of parliament (MPs) a better chance of competing against the PAP. When contesting a GRC, a party is required to nominate a number of candidates, depending on the size of the GRC (they all currently have either five or six seats), all of whom become MPs in the event that the party outperforms its opponents in that constituency. GRCs were introduced before the 1989 general election; the PAP claims that they help to ensure that non-Chinese ethnic groups are represented in parliament, as at least one of each party's nominated candidates must come from an ethnic minority, typically Indians or Malays. However, the opposition argues that GRCs are aimed as much at preserving the PAP's political dominance as at promoting minority rights. GRCs have often been formed through the merger of pro-PAP constituencies with a single-member constituency in which an opposition party has polled well, and no opposition party has ever won a GRC.

These modest reforms are seen in some quarters as an acknowledgement by the PAP that it cannot remain overwhelmingly dominant as Singapore becomes a more open and diverse society. But the reforms are not expected to loosen the PAP's stranglehold on power, as NCMPs and NMPs have only limited voting rights in parliament. Moreover, although the changes will ostensibly widen the range of opinion represented in the legislature, the PAP does not yet appear willing to give consideration to opposition views regarding the preferred direction of Singapore's political and economic development.

Speculation about the likelihood of an early parliamentary poll has intensified in recent months, most notably following an announcement in January by the Elections Department urging voters to verify their details on the city state's electoral roll. A review of electoral boundaries is already under way, following an announcement in October 2010 that the Electoral Boundaries Review Committee had been convened. This body, which reviews and draws up electoral boundaries, has in the past published its recommendations regarding changes to constituencies around two months before an election. Although the PAP will be mindful of the fact that its share of the popular vote dropped at the 2006 election, to 67%, from 75% in 2001, there is little doubt that its wealth of experience and talent gives it a significant advantage over the opposition parties. Moreover, the government will continue to impose strict limits on freedom of speech and assembly, thereby preventing the opposition from campaigning openly and effectively. The result of the next election is therefore not in any real doubt, and the PAP is set to win another substantial parliamentary majority. However, if the PAP's percentage of the vote falls below 67%, it may signal that latent voter discontent is coming to the fore. Should the ruling party win less than 60% of the popular vote, this might pave the way for the emergence of a more vigorous democratic opposition. It is likely that one of the PAP's main concerns regarding the forthcoming election is the possibility that it might lose one of the GRCs to an opposition party for the first time.

The president, S R Nathan, recently indicated that he will not seek re-election when his term ends in 2011. His victory in 2005 was controversial, as he won by default after three potential rivals were disqualified. Any potential candidate for the presidency must first be vetted by an election committee.

Singapore's relations with its closest neighbours, Malaysia and Indonesia, are expected to improve in 2011-15. If the domestic political situation in those two countries remains stable, this will make it easier for Singapore to resolve more of its prickly and long-running bilateral disputes with them. Relations with Malaysia have been warming, owing in part to the substantial opportunities that are emerging in the Iskandar Malaysia (IM) development region, an area three times the size of Singapore that lies just over the island state's border with Malaysia, in southern Johor. This is proving a magnet for investment by Singaporean manufacturers and is acting as a focus for increased collaboration between the two governments. Although the IM is still in its early stages, greater connectivity between the two countries will improve crossborder access and promote economic integration, bringing together Singapore's workforce and Malaysia's land and other natural resources. However, a degree of racially tinged wariness will persist between the two countries, despite the mutual desire for stronger economic ties.

Singapore will also continue to seek ways to encourage greater economic integration in Asia and Australasia and to promote global free trade, thereby helping to reinforce its position as an important transport and financial hub. In this respect, Singapore will continue to play an active role at the forefront of moves to improve co-operation and integration among the ten members of the Association of South-East Asian Nations (ASEAN).

In terms of broad policy initiatives, in the next few years the government will proceed with plans to implement the recommendations of the Economic Strategies Committee, a body created by the prime minister in May 2009 to examine ways of ensuring Singapore's continued prosperity. The committee's proposals, which form the basis of the budget for fiscal year 2010/11 (April-March), include restricting growth in the number of foreign workers, freeing up land for development, and increasing productivity growth by improving labour skills and relying more heavily on technology and innovation. As indicated by the tightening of policy in October 2010 by the Monetary Authority of Singapore (MAS, the central bank), in the short term the policy agenda is expected to focus on maintaining price stability amid firm domestic demand, as the economy remains on a sustained growth trajectory.

Singapore's fiscal stance is expected to tighten in 2011-15 as the government maintains its countercyclical approach to policymaking. The government is targeting a small budget surplus of S$1bn (US$770m) in 2011/12. Excluding a range of special transfers (such as growth dividends), the government plans to increase total expenditure in 2011/12 by just 1.5%, to S$47.1bn, while it expects revenue to increase by 5.9%, to S$48.1bn. For 2010/11 the government initially targeted a deficit of S$7.2bn, but unexpectedly rapid revenue growth has meant that it now expects to post a shortfall of just S$930m. On a calendar-year basis the government ran a small surplus in 2010, equivalent to 0.2% of GDP, and, in line with the latest budget plans and the current direction of policy, small surpluses will also be recorded in 2011-12. Assuming that the economy remains on a sustainable growth path during the latter part of the forecast period, strong revenue growth, coupled with modest public expenditure, will result in more sizeable budget surpluses from 2013 onwards.

In order to contain inflation during the next two years, the MAS is expected to allow further appreciation in the nominal effective exchange rate (NEER), which is derived from an undisclosed basket of trading partners' currencies. In pursuit of its objective of promoting non-inflationary sustainable growth, the MAS manages the NEER within a set band (the centre and width of which are also undisclosed), rather than using short-term interest rates as policy instruments. In October 2010, in its latest twice-yearly monetary policy statement, the MAS signalled that it intended to allow a slightly faster pace of appreciation in the NEER, announcing that it would steepen slightly the slope of the band within which the NEER is kept, while also widening the band. It is likely that the MAS will take further steps at its two policy meetings this year, in April and October, to strengthen the exchange rate so as to offset the impact of soaring global commodity prices on the domestic price level. Assuming that inflationary pressures subside during the latter part of the forecast period, the MAS will loosen policy, possibly reverting to a slightly flatter slope for the NEER policy band or again adopting a zero-appreciation stance.

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Singapore's economy recovered strongly in 2010, expanding by 14.5%, driven by rapid growth in manufacturing and services. The economy is now expected to move to a more stable growth path, with real GDP growth averaging 5% a year during the forecast period. However, as the economy remains largely unchanged structurally and continues to be dominated by the external sector, it will continue to be exposed to fluctuations in global demand. The Economist Intelligence Unit's central forecast is that world economic growth will remain steady at around 3% a year over the next five years, but there is a risk that the pace of global growth will falter and thereby damage growth prospects in Singapore, particularly if sovereign debt troubles worsen in the euro zone or if political unrest in North Africa and the Middle East causes international crude oil prices to remain at their current high levels this year and next. Based on our central forecast, Singapore's exports of goods and services will grow at an average annual rate of 9.5% in the next five years. Gross fixed investment is expected to expand by an average of 7% a year in the forecast period, bolstered by large government-funded projects, while private consumption growth will remain healthy, averaging 4.2% a year. The government will remain supportive during the early part of the forecast period, providing a range of measures to bolster consumption and investment.

On a sectoral basis, the industrial sector (including construction) is expected to grow at an average rate of 5.1% a year in 2011-15, boosted by solid gains in manufacturing. Biomedical firms will play an increasingly important role in the manufacturing sector during the forecast period, following output growth in the biomedical subsector of 49.8% in 2010. Although output in the biomedical segment can fluctuate strongly from one month to the next, owing to factory shutdowns as the product mix is changed, the subsector is less sensitive than the electronics industry to fluctuations in the rate of global economic growth. Solid growth in external demand during the forecast period will help to boost entrepôt trade, while rising business and consumer confidence will help to support the wholesale and retail services sectors. Although there are concerns about excess room capacity in hotels now that two casino-based hotel resorts have opened, the new developments represent a major boost to Singapore's tourism infrastructure.

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In view of the acceleration in inflation that occurred in January and further upward revisions to our forecast of global prices for non-oil commodities in 2011, we have revised up our expectation of average consumer price inflation in Singapore this year to 4.1%, from 3.2% previously. The housing category will exert a strong upward influence on consumer prices as Singapore Power increases its electricity tariffs in line with rising global oil prices. However, transport costs are unlikely to continue to rise at their current rapid pace on a year-on-year basis (accelerating inflation during much of 2010 was driven largely by a surge in the cost of government-issued licences for vehicle ownership). Moreover, the appreciation of the Singapore dollar (in line with the MAS's policy of allowing the NEER to strengthen) will help to damp down import price pressures in 2011. From 2012 onwards inflation is forecast to slow, owing to moderating global prices for oil and non-oil commodities.

In line with recent policy changes (under the managed floating exchange-rate system) to strengthen the Singapore dollar, in 2011 the local currency will strengthen against the US dollar by nearly 8%, following annual average appreciation of 6.7% in 2010. However, as inflationary pressures ease over the remainder of the forecast period, there will be scope for the authorities to try to slow the currency's appreciation against the US dollar and the euro in order to maintain the city state's international competitiveness. Managing the exchange rate could be complicated by factors influencing the values of other currencies, notably China's renminbi, given the external pressure that is being exerted on the Chinese authorities to revalue their currency. Imbalances in the US and European economies could also lead to periods of turbulence for the US dollar and the euro, giving rise to volatility in Asian currency markets.

Singapore enjoyed a rapid recovery in merchandise export revenue in 2010. Although revenue will continue to rise, the pace of growth will be relatively slow in the early part of the forecast period. The import bill will meanwhile continue to expand as a result of a healthy rate of increase in domestic demand and renewed growth in the export-oriented manufacturing sector, but export revenue will be sufficient to keep the merchandise trade account in a strong position. The services account will remain in surplus in the forecast period, boosted by plentiful tourism receipts and strong external demand for Singapore's financial services. By contrast, the income account will stay in deficit throughout the period. Although income from abroad is expected to grow as local companies and the MAS enjoy a rise in returns on overseas investments, income payments will also increase, in line with higher profits made by foreign companies with subsidiaries in Singapore. The current account will continue to post large surpluses in the forecast period, owing to healthy surpluses on the merchandise trade account.

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A parliamentary election is widely expected to be held later this year, and Singapore's ruling People's Action Party (PAP) had an opportunity to woo voters on February 18th, when it announced the budget for fiscal year 2011/12 (April-March). The finance minister, Tharman Shanmugaratnam, did not disappoint the public. The budget contained a raft of policies aimed at addressing voters' complaints, from a S$3.2bn (US$2.5bn) "grow and share" package of cash grants and tax rebates to protect households from the rapidly rising cost of living, to new measures aimed at restricting the number of foreign workers in the city state. It would be wrong to describe the budget as populist-many of the measures make sound economic sense at this time of high inflation and full employment-but the financial support measures announced by the finance minister will certainly do nothing to harm the PAP's chances when Singapore goes to the polls.

An election does not have to be held until February 2012, but the prime minister, Lee Hsien Loong, is widely thought to be considering dissolving parliament by mid-2011. There have been a number of signs in recent months that an election is imminent. One was Mr Lee's decision in October 2010 to convene the Electoral Boundaries Review Committee, which in the past has published its recommendations for changes to constituency boundaries around two months before polling day. This was followed by the Elections Department's decision in late January this year to call on all voters to confirm their details on the city state's electoral roll.

The overall result of the next election is not really in any doubt: the PAP will secure another unassailable majority in parliament (the legislature), as it has at every election since 1955, when the city state was still ruled as a colony by Great Britain. Nonetheless, Mr Shanmugaratnam's budget will provide PAP candidates with new ammunition to counter accusations by opposition parties that the government has done little to support Singaporeans amid surging inflation.

The latest increases in the foreign workers' levy (which is paid by employers), following similar rises in the 2010/11 budget, will also prove politically expedient for the PAP, at a time when many voters are concerned about the growing number of migrants who are arriving in the city state and becoming permanent residents (a status that gives them rights to state-subsidised homes and other benefits). Mr Shanmugaratnam said that the monthly levy for foreign workers employed in the manufacturing sector would rise by an additional S$60 (around US$45) by July 2013, to reach a maximum of S$550 per month. Meanwhile, the monthly levies for foreign workers in the services and construction sectors are to rise by an additional S$180 (to a maximum of S$600) and S$200 (to a maximum of S$600) respectively.

When presenting the S$47.1bn budget for 2011/12 to parliament, the finance minister said that the Singapore dollar's exchange rate, which is set by the Monetary Authority of Singapore (MAS, the central bank), would be important in controlling inflation, but that fiscal policy also had a role to play. The government has become increasingly concerned about the acceleration in inflation, which in January rose to a 25-month high of 5.6% year on year. A day before the budget speech, the Ministry of Trade and Industry revised up its forecast of average inflation this year to 3-4%, from 2-3% previously. Mr Shanmugaratnam said that inflation was a key concern this year, especially for low-income families.

The budget contained a number of measures aimed at supporting poorer households. Mr Shanmugaratnam said that families on the Workfare Income Supplement (WIS) scheme would receive a "special bonus" payment to be calculated on the basis of work done in 2010-12. There will be two bonus payments this year, the first on May 15th. Mr Shanmugaratnam also said that personal income taxes would be reduced significantly for middle-income and upper-middle-income earners through a reduction in the tax rate on the first S$120,000 (US$94,000) of taxable income. In addition to this, those paying personal income tax will receive a 20% rebate, up to a maximum of S$2,000. The workfare bonus and the income tax rebate are part of the S$3.2bn "grow and share" package of one-off measures aimed at alleviating the effects of higher inflation on disposable incomes. The package also includes "growth dividends" worth a total of S$1.5bn, to be paid to all of Singapore's taxpayers.

Among the budget measures aimed at supporting businesses facing rising costs, Mr Shanmugaratnam announced a 20% rebate on corporate income tax, up to a maximum of S$10,000. Small- and medium-sized businesses may also draw on a cash grant, capped at S$5,000. In addition, there are specific tax incentives for the financial, maritime and pharmaceutical sectors and for commodity-trading markets. Firms will, however, have to make a greater contribution to the Central Provident Fund (CPF, the compulsory national savings scheme): the finance minister announced a 50-basis-point increase in the rate of employers' contributions to the fund, to 16%.

In an attempt to boost Singapore's productivity by a cumulative 30% over the next ten years, in line with the recommendations of the Economic Strategies Committee (a high-level body created by the government in 2009 to look into ways to ensure continued prosperity for the city state), Mr Shanmugaratnam increased support for the National Productivity Fund to S$2bn in this year's budget, from US$1bn in 2010/11, and announced further tax incentives under the Productivity and Innovation Credit scheme. As a result, for tax purposes companies will be able to deduct up to 400% of their expenditure on training, investment and other categories of activity covered by the scheme. The cap for such claims was also raised, to S$400,000 per firm, from S$300,000. In addition, increased support was announced for programmes under the government's continuing education and training plans.

Mr Shanmugaratnam said that as a result of the measures announced in the new budget, operating and development expenditure would reach S$47.1bn in 2011/12, up by 1.5%, while operating revenue would rise by 5.9%, to S$48.1bn, resulting in a primary surplus of around S$1bn, compared with a revised deficit of S$930m (US$690m) in 2010/11. The basic deficit, which includes special transfers, mainly in the form of top-ups to endowment and trust funds and of cash hand-outs in the shape of "growth dividends", is expected to narrow to S$2.2bn, from S$2.5bn in 2010/11. Owing to the improvement in the budget position, Mr Shanmugaratnam said that the government had decided to pay back into its fiscal reserves the S$4bn that it had withdrawn to finance stimulus programmes in the past two years.

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According to data published in mid-February by the Ministry of Trade and Industry, Singapore's economic expansion in the fourth quarter of 2010 was slightly less rapid than had been suggested by the advance estimate released by the ministry in early January. Real GDP expanded by 12% year on year in the quarter (the advance estimate had put growth at 12.5%). On a seasonally adjusted quarter-on-quarter basis, the economy expanded at an annualised rate of 3.9% in October-December, compared with an initial estimate of 6.9%. However, in 2010 as a whole Singapore still recorded its fastest pace of growth since records began in the early 1960s, with real GDP expanding by 14.5%. In mid-February the trade and industry ministry reaffirmed its forecast, originally announced in November, that economic growth in 2011 would slow to 4-6%. Despite the recovery of the global economy and strong trade flows in Asia, the ministry said that it was concerned about the risk of sovereign debt defaults in some European economies and of further monetary tightening in Asia owing to rising inflationary pressures.

Both domestic and external demand contributed to the local economy's strong performance in 2010. Private consumption expanded by 4.3% year on year in the fourth quarter, up from 1.5% in the third, taking private consumption growth in the year as a whole to 4.2%. Meanwhile, public consumption rose by 11.3% in the fourth quarter, down from 11.8% in the third, but in 2010 as a whole it accelerated to 11%. Growth in gross fixed investment slowed slightly, to 5.7%, in the fourth quarter, from 5.8% in the previous three months. In the year as a whole fixed investment expanded by 5.1%, reversing the contraction of 2.9% recorded in 2009. Net exports also made a strong contribution to GDP growth. In the fourth quarter exports of goods and services rose by 12.1%, representing a slowdown in the rate of growth from 19.8% in the third quarter, but in January-December exports of goods and services expanded by 19.2%, their fastest pace of growth since records began. Meanwhile, imports grew by 12.8% in the fourth quarter, pulling growth in 2010 overall down to 16.6%.

Inflation accelerated again in January, with consumer prices rising by 5.5% year on year-up from 4.6% in December, and the fastest rate since December 2008, according to the Department of Statistics. On a seasonally adjusted month-on-month basis prices rose by 1.3% in January, compared with an increase of 0.9% in December. Higher transport costs were the main contributor to inflation, rising by 18.4% year on year. As well as higher prices for Certificates of Entitlement (state-auctioned licences to purchase private vehicles), prices for which have risen sharply in the past two years or so in line with attempts to ease traffic congestion, an increase in the cost of fuels also contributed to the jump in inflation in January. On a month-on-month basis, transport costs rose by 5.8%. But inflationary pressures were evident across all but two of the categories of goods and services that make up the consumer price index (CPI). The cost of food rose by 2.8% year on year in January, up from 2.1% in the previous month. Inflation also accelerated in the clothing and footwear category of the CPI (to 0.2%), in housing (to 5.3%), in education and stationery (to 3.8%) and in healthcare (to 3%). Prices for communications and for recreation and "other" goods and services were the only ones to have recorded slower inflation in January than in December, rising by 0.6% and 0.7% respectively.

Sentiment in the manufacturing sector appears to be becoming more positive, but the opposite is true of the services sector, according to a recent survey by the Economic Development Board (EDB), a government agency. A net weighted balance of 20% of the 400-odd manufacturing firms polled in December and January said that trading conditions in the first half of 2011 would be better than in the fourth quarter of last year; only a net weighted 3% of respondents to the EDB's previous survey, which was conducted in August and September, had expected trading conditions to improve. Around 27% of respondents to the latest survey said that conditions would improve in January-June 2011 relative to October-December 2010, while only 7% expected conditions to worsen. Most respondents (66%) said that conditions would remain unchanged. Transport engineering firms were the most upbeat, with a net weighted 55% of such companies expecting conditions to improve in the first half of 2011, followed by electronics (14%), chemicals (12%), biomedical (10%) and general manufacturing firms (10%). The most downbeat respondents were precision-engineering firms, with a net weighted balance of only 9% expecting conditions to get better.

A separate survey, conducted by the Department of Statistics, found that a net weighted balance of 19% of around 1,400 firms in the service sector expected conditions to improve in the first half of 2011 relative to July-December 2010. However, this represented a fall from the net weighted balance of 27% expecting an improvement among respondents to the previous survey, which was conducted in September and October. Around 31% of respondents to the latest survey said that conditions would improve, while 12% said they would worsen and 57% said that they would remain the same. Amusement and recreation firms were the most optimistic, with a net weighted 61% expecting conditions to improve in the first half, followed by financial services (47%), hotels and catering (25%), wholesale and retail trade (18%), business services (18%) and real estate (7%). Information and communications firms were the most pessimistic. A net weighted balance of 2% of such firms expected trading conditions to deteriorate in the next six months.

Singapore's tourism sector is booming. According to a state agency, the Singapore Tourism Board (STB), the number of visitor arrivals rose by 20.2% in 2010, to a record 11.6m. Tourism revenue is estimated at S$18.8bn (US$14.7bn) in the year, representing a rise of 49.2%. These results mean that the government's target of attracting 11.5m-12.5m visitors in 2010 was achieved, and that its goal of tourism revenue of S$17.5bn-18.5bn was exceeded. The sector's strong growth last year was partly a reflection of the low base of comparison in 2009, when visitor numbers fell by 4.3% owing to the global recession. However, the tourism sector has also been boosted since early 2010 by the opening of two casino-based resorts, at Sentosa and Marina Bay.

Resorts World Sentosa, operated by the local subsidiary of a Malaysian gaming group, Genting, opened its doors in February 2010. Among other attractions, it boasts four hotels, a theme park and Universal Studios Singapore, as well as the Resorts World Casino. The second resort, Marina Bay Sands, opened last April. Operated by a subsidiary of Las Vegas Sands of the US, its attractions include a three-tower hotel, two theatres and a casino. The government hopes that the two resorts will help to raise tourism revenue to S$30bn a year by 2015.

According to the STB's figures, in 2010 spending on sightseeing and entertainment recorded its fastest pace of growth ever, surging by 1,834% to around S$3.9bn. Accommodation revenue rose by 25% to around S$3.6bn, food and beverages revenue by 23%, to S$1.9bn, medical revenue by 19%, to around S$900m, shopping revenue by 17%, to S$3.9bn, and other tourism revenue (including air fares, port taxes and expenditure on local transport) by 16%, to S$4.5bn. Indonesia was Singapore's main source of tourists in 2010, with Indonesians accounting for 2.3m visits to the city state, representing a rise of 32%. The number of Chinese visitors was meanwhile up by 25%, to 1.2m, while Malaysian visitor numbers increased by 36%, to 1m, and Australian arrivals grew by 6%, to 880,000.

Singapore's surplus in its transactions with the rest of the world increased in both the fourth quarter of 2010 and in the year as a whole, according to the trade and industry ministry. The balance-of-payments surplus (before official financing) rose to S$16.5bn in the fourth quarter, from S$6.3bn in the third, taking the surplus for the whole year to S$57.5bn, more than triple that of S$16.5bn posted in 2009. The current-account surplus fell to S$15.7bn in the fourth quarter, down from S$19.1bn in the third, mainly owing to a smaller goods and services surplus, but the whole-year surplus stood at US$67.4bn, up from S$50.8bn in 2009. The goods surplus increased to S$63.6bn in 2010, from S$42.5bn in 2009, more than compensating for a widening of the income deficit, to S$11.2bn, from S$6.4bn in 2009. The capital and financial account moved into surplus to the tune of S$1.5bn in the fourth quarter, from a deficit of S$13.3bn in the third, but in 2010 as a whole it remained in the red, recording a deficit of S$9.5bn, although this was smaller than the previous year's shortfall of S$39bn. A surge in foreign direct investment, resulting in a net inflow of S$25.7bn in 2010, compared with a net outflow of S$4.6bn in 2009, was the main factor underlying the smaller deficit on the capital and financial account, although smaller net outflows of "other" investment were also important.

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Please see graphic below

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Please see graphic below

Land area

710.2 sq km (including smaller islands)

Population

5.1m (mid-2010 government estimate; 3.8m excluding non-residents)

Climate

Tropical

Weather (altitude 10 metres)

Hottest month, May, 24-32°C (average daily minimum and maximum); coldest month, January, 23-30°C; driest month, July, 70 mm average rainfall; wettest month, December, 244 mm average rainfall

Languages

English, Chinese, Malay and Tamil

Measures

The metric system is now predominant

Currency

Singapore dollar (S$); S$1 = 100 cents. Average exchange rates in 2010: S$1.36:US$1, S$1.55:¥100

Time

8 hours ahead of GMT

Public holidays

January 1st (New Year's Day); February 3rd-4th (Chinese New Year); April 22nd (Good Friday); May 17th (Vesak Day); May 2nd (Labour Day); August 9th (National Day); August 30th (Hari Raya Puasa); October 26th (Deepavali); November 7th (Hari Raya Haji); December 25th (Christmas Day, holiday taken on December 26th)

Official name

Republic of Singapore

Form of state

Parliamentary democracy

The executive

The prime minister and the cabinet are appointed by the president and are responsible to parliament

Head of state

The president, S R Nathan, took office for a six-year term in 2005

National legislature

Unicameral parliament, which sits for five-year terms, with 84 elected members: nine members of parliament (MPs) are directly elected from single-member constituencies, and 75 are elected in teams of five or six to represent the 14 group representation constituencies (GRCs). At least one member of any group standing for a GRC must be of non-Chinese ethnicity. Currently, one non-constituency MP and nine nominated MPs also sit in parliament, but they have only limited voting rights

Legal system

Courts of first instance ultimately lead, on appeal, to the Supreme Court, members of which are appointed by the president

National elections

The most recent general election took place in 2006; the next is due by February 2012

National government

The ruling People's Action Party (PAP) won 66.6% of the vote at the last election and holds 82 seats in parliament. The cabinet was reshuffled in November 2010

Main political organisations

Government: PAP; opposition: Workers' Party (WP), Singapore Democratic Alliance (SDA), Singapore Democratic Party (SDP), Democratic Progressive Party (DPP)

Main members of cabinet

Prime minister: Lee Hsien Loong

Minister mentor, Prime Minister's Office: Lee Kuan Yew

Prime Minister's Office:

;Lim Swee Say

;Lim Boon Heng

;Lim Hwee Hua

Senior ministers:

;Goh Chok Tong

;Shunmugan Jayakumar

Deputy prime minister & minister for defence: Teo Chee Hean

Deputy prime minister & minister for national security: Wong Kan Seng

Key ministers

Communications, information & the arts: Lui Tuck Yew

Community development: Vivian Balakrishnan

Education: Ng Eng Hen

Environment: Yacoob Ibrahim

Finance: Tharman Shanmugaratnam

Foreign affairs: George Yeo

Health: Khaw Boon Wan

Home affairs & law: K Shanmugam

Manpower: Gan Kim Yong

National development: Mah Bow Tan

Trade & industry: Lim Hng Kiang

Transport: Raymond Lim

Chairman of the Monetary Authority of Singapore

Goh Chok Tong