budget seminar 2016

1

April 2016

The Singapore

Budget 2016

UOB Global Economics & Markets Research

After-thoughts

A Survey Of The Global Environment

The Singapore Budget 2016

2


0

50

100

150

200

250

2000 2002 2004 2006 2008 2010 2012 2014 2016

Bloomberg Commodity Index

BCOM Index

0

20

40

60

80

100

120

140

160

2000 2002 2004 2006 2008 2010 2012 2014 2016

West Texas Intermediate Crude

USCRWTIC Index

0

500

1000

1500

2000

2500

3000

3500

2000 2002 2004 2006 2008 2010 2012 2014 2016

Aluminium

LMAHDS03 Comdty

0

2000

4000

6000

8000

10000

12000

2000 2002 2004 2006 2008 2010 2012 2014 2016

Copper

LMCADS03 Comdty

World Commodities Prices Remain Depressed

3

-68% -79%

-54% -55%

Source: Bloomberg (Daily Data)


0

20

40

60

80

100

120

2007 2008 2009 2010 2011 2012 2013 2014 2015

Index (2007 Jan = 100)

Singapore

China

India

Indonesia

Japan

Korea

Malaysia

Philippines

Taiwan

Thailand

EU

United Kingdom

United States

New Zealand

Australia

4

Deflationary Trends Prompted Global Central Banks To Ease Policies

Central Bank Policy Rates (Jan 2007 = 100)

Source: CEIC (Monthly Data)

UOB Global Economics & Markets Research 5

Recent Crude Oil Prices Showed Weaker Trend Versus Last Two Crises – May

Trade Lower To US$20-30 In 2016 (From Base Case US$30-35)

Comparing The 1985, 2008 & 2014 Oil Busts

Source: US EIA (Daily Data)

-80

-60

-40

-20

0

20

40

0 100 200 300 400 500 600 700 800

May 1985 - Sep 1988 May 2008 - Dec 2010 From Dec 2013 - Mar 2016

Oil Price Indexed To Zero

Number of Days

The long-awaited rebound?


Source: US EIA, CEIC

0

40

80

120

160

Apr-83 Apr-87 Apr-91 Apr-95 Apr-99 Apr-03 Apr-07 Apr-11 Apr-15

WTI Brent Crude

1990 Gulf War

followed by US

recession 1997/98 Asian

Financial Crisis

2008/09 Global

Financial Crisis

2001 US recession

2014 Oil

Slump

US$/bbl

1985/86 Oil Crisis:

Increase in the supply

of oil and change in

OPEC policy

6

Recent Periods Of Sharp Oil Price Declines

Episodes Of Oil Price Declines >30% In 6-month Period

Quarterly Chart of US Dollar Index (DXY) until end Mar 2016

The U.S Dollar has been weak since the December rate hike

Source: Bloomberg, UOB Global Economics & Markets Research

Divergence between U.S Data (Red) and USD Positioning (Blue)

Divergence between U.S data and the USD


Daily Chart of Bloomberg JPM Dollar Index (Green) & CFTC USD Positioning (Yellow)

Unless USD positioning improves, DXY is still susceptible to further downside


Monthly Chart of Bloomberg JPM Asia Dollar Index (ADXY) & Fed Funds Rate (FDTR)

We showed this in Q1 - Asian Currencies (ADXY) Were Resilient In Previous Fed Hike Cycles


Monthly Chart of Bloomberg JPM Asia Dollar Index (ADXY) & Fed Funds Rate (FDTR)

Strong Bounce in Asian Currencies (ADXY)


Monthly Chart of USD/SGD – 1.3515

High Conviction Trades

Source: Reuters, UOB Global Economics & Markets Research

Monthly Chart of EUR/USD – 1.1375



Monthly Chart of AUD/USD – 0.7665




China “New Normal”: Manufacturing

China Industrial Value Added YTD

Source: CEIC, UOB Global Economics & Markets Research


… serious excess capacity in China since 2008

Source: IMF Staff Calculations, IMF Article IV Report, 2012 http://www.imf.org/external/pubs/ft/scr/2012/cr12195.pdf

16

China “New Normal”: Excess Capacity

Average Capacity Utilization (%)

http://www.imf.org/external/pubs/ft/scr/2012/cr12195.pdf




1% growth: in 2014 = +RMB554bn vs. in 2004 = +RMB214bn, or 2.6x larger… … i.e. 7.3% growth in 2014 is equivalent to 18% growth in 2004 …

17

China “New Normal”: Quality Versus Quantity

China Real GDP & Growth Rate

Source: IMF, UOB Global Economics & Markets Research


Watch For FX/Interest Rate Risks: Volatility

USD/CNY Trend



ASEAN Will Take The 4th Spot In GDP Ranking By 2025

Nominal GDP By Economies (2001-2030)

US

China

Eurozone

Japan

UK

ASEAN

0

5

10

15

20

25

30

2001 2005 2009 2013 2017 2021 2025 2029

US$ Trillions

2018 2025

Source: IMF, World Bank, UOB Global Economics & Markets Research

Since 2000, China & ASEAN Saw Rapid & Stable Growth

Source: IHS; World Economic Outlook (IMF), McKinsey Global Institute

Selected Key Economic Indicators Comparing ASEAN & ROW

0

1,000

2,000

3,000

4,000

5,000

2009 2020 2030

Asia Pacific LatAm MENA

South Africa Europe North America

Growing Population and Consumer Affluence

340mn

-50 0 50 100 150 200 250 300 350

Japan

CIS

EU-27

ROW

US

LatAm

MENA

South Africa

Asia ex-Japan

Population Change by Region, 2010-2020 Growing Middle Class

525mn 3,228mn

Source: UN, OECD, The Brookings Institution, UOB Global Economics & Markets Research

1,740mn

A Survey Of The Global Environment

The Singapore Budget 2016

23


Budget 2015

24

Budget 2015 Pages Number

Building our Future, Strengthening Social Security

6 to 19 14

Assurance in Retirement 46 to 56 11

Supporting Families, Strengthening Community

59 to 70 12

Investing in Innovation & Internationalisation

32 to 43 12

Developing our People 21 to 30 10

37

Soci

al

Eco

no

my

(63%)

(37%) 22

Building Our Future, Strengthening Social Security


Budget 2016

25


Building a Caring & Resilient Society 47 to 65 19

Transforming our Economy through Enterprise & Innovation

Growing Singapore Together 11 to 16 6

Addressing Near-Term Concerns 17 to 21 5

Industry Transformation Programme 22 to 25 4

- Enterprise 25 to 29 5

- Industries 29 to 32 4

- Innovation 33 to 39 7

Supporting Our People 39 to 44 6

Soci

al

Eco

no

my

37

(34%)

(66%)

Partnering for the Future


Budget 2016

26


Building a Caring & Resilient Society 47 to 65 19

Transforming our Economy through Enterprise & Innovation

Growing Singapore Together 11 to 16 6

Addressing Near-Term Concerns 17 to 21 5

Industry Transformation Programme 22 to 25 4

- Enterprise 25 to 29 5

- Industries 29 to 32 4

- Innovation 33 to 39 7

Supporting Our People 39 to 44 6

Soci

al

Eco

no

my

21

(34%)

(84%)

(16%) Short-Term

Long-Term

Partnering for the Future


Economic Initiatives

Supporting Businesses

Short Term Measures

Transition Support Package

Public Infrastructure Projects

Enhance Corporate Income tax Rebate

Extend Special Employment Credit

SME Loan Assistance

Enhance Revitalisation of Shops Package

Longer Term

Measures

Industry Transformation

Programme

Transforming Enterprises

Business Grants Portal

Automation Support Package

Financing & Tax

Incentives

Support For Internationali

sation

Transforming Industries

National Trade

Platform

National Robotics

Programme

Increasing Outreach Through

TACs

Transforming Through

Innovation

Deepen Innovation

Capabilities

Strengthen Innovation & Enterprise Networks

Jurong Innovation

District

Shifting From Broad-Based Support

Supporting People

Investing in SkillsFuture

Adapt and Grow

Initiative

Increase Jobs

Matching

TechSkills Accelerator


Even As Firms Were Struggling With Revenue, Business Costs Continued

To Rise In 2015

28

Source: MTI


A Large Part Was Due To Higher Labour Cost

29

Source: MTI


Productivity & Resident Real Average Wage Growth (2005-15)

30

Size of the bubbles represents the sector’s employment size in 2015. Source: MTI Staff estimates based on administrative and survey records

Improve Productivity

Thank you