If the global economic slowdown is deeper or longer than presently expected, or both, the Government may need to take steps to counter an extended loss of export earnings. Given the high degree of openness of the economy, external shocks feed through to domestic demand and price pressure quickly. Fortunately, given its strong fiscal position, the Government has latitude to ease fiscal policy to cushion the economy against an adverse external shock. Indeed, it is already moving to modestly reduce corporate, property, and income tax rates in 2001, while planning for a small increase in revenues, in part based on the contributions of past budget surpluses in the form of net investment income. However, planned operating and development expenditures plus special transfers are to remain roughly constant so that the Government expects a continuation of the budget surplus in 2001.
Price stability remains the primary goal of monetary policy.
Thus, as it has previously signaled, the MAS would likely tighten monetary policy if consumer price inflation edges above 2 percent, resulting in a strengthening of the trade-weighted exchange rate. Thus, the Government is likely to proceed cautiously in allowing the exchange rate to appreciate. In the longer term, the Government is eager to retain Singapore s distinction of having one of the world s most competitive economies. It continued its efforts in 2000 to improve the business environment by divesting its holdings in companies, by expanding opportunities for foreign direct investment, and by facilitating development of selected economic sectors. Sales of government interests in transport companies were initiated, while preparations to reduce state interests in leading firms in other sectors progressed.