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Singapore election outlook

07 January 2020 Asad Ali

Leaders of several opposition political parties in Singapore announced on 14 December that they had attended briefings at the Elections Department to review new voting equipment and online services to be employed in the next general election, indicating that the election is imminent.

Singapore's general election will most likely be held in late March 2020, with the ruling People's Action Party (PAP) almost certain to win. Although the government has until April 2021 to call the next election, the formation of the Electoral Boundaries Review Committee (EBRC) in August 2019 was a strong indicator that the government was considering early polls. Historically, the government has often scheduled elections soon after the passage of the year's budget, taking the opportunity to introduce new policies popular with voters. The finance ministry is scheduled to present next year's budget in February, with passage expected in March. The most probable date for the election is during the one-week school holiday from 14 to 22 March, since school buildings are frequently used as polling places and counting stations. The PAP, which has never won less than 60% of the popular vote in any general election since independence under Singapore's first-past-the-post system, is almost certain to return to power, with opposition parties largely underfunded and divided.

Deputy Prime Minister Heng Swee Keat is likely to assume the premiership soon after elections and is very likely to ensure broad policy continuity. Current prime minister Lee Hsien Loong will probably step down in favour of Heng, who also serves as finance minister, after the general election, possibly around the 15th anniversary of Lee's premiership in August 2020. Heng has taken the lead on economic policy formulation as finance minister since 2015, and has played an increasingly prominent role in the daily management of the government as Lee's deputy over the past year. As such, Heng will provide a very high level of policy continuity. Moreover, Lee is likely to retain his seat in parliament and remain in the cabinet as a senior minister.

The government will probably adopt expansionary fiscal policies to create a favourable environment for the transition to Heng's "fourth generation" leadership. Singapore's economy remains vulnerable to external trade shocks, a risk heightened by the unresolved China-US trade conflict. Despite better-than-expected economic data for the third quarter of 2019, IHS Markit projects Singapore's GDP growth of only 0.7% year on year for 2019. The government is likely to adopt expansionary fiscal measures to bolster growth, especially considering the probable leadership transition. Likely measures include increased social welfare subsidies for low-income citizens, increased educational outlays, and increased investments in public health. In addition, the government is considering new public housing schemes, both to facilitate home ownership by younger workers and to stimulate the vital construction sector. Likewise, to help revive growth in the flagging manufacturing and services sectors, the government is likely to delay the planned increase in the Goods and Services Tax (from 7% to 9%) until the economy has returned to stronger growth, probably later in the new prime minister's term.

Indicators of changing risk environment

Increasing risk

  • A better-than-expected showing by the opposition in the 2020 general election, reducing the ruling PAP's popular vote share to less than 63%, would probably delay the leadership transition from Lee to Heng.
  • A sharper slowdown in global growth - for example, because of a re-escalation in the China-US trade war - is likely to put Singapore into recession, which would also delay the leadership transition.

Decreasing risk

  • A strong showing by the ruling PAP in the 2020 general election, which improves significantly upon the party's performance in 2015 when it won 83 of 89 contested seats, would indicate a robust mandate for the PAP and expedite the leadership transition.
  • A faster-than-expected cyclical upturn in the global technology sector, or significant progress in the trade negotiations between China and the US, will help spur Singapore's economic recovery, which will also expedite the transition.

Posted 07 January 2020 by Asad Ali, Senior Analyst – Asia Pacific, Country Risk & FCM, IHS Markit



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