FDI Inflows Continue to Boost Singapore’s Economy
“FDI will remain robust in Singapore, as government investment in advanced technologies, decarbonisation, and workforce upskilling continues,” says Eric Xu, Executive Director, Metals and Mining and Head of FDI Desk at DBS.
Since 1995, Singapore has seen its gross capital inflows trend upwards, with foreign direct investments (FDI) commanding an ever-larger slice of the pie.
In 2023, FDI inflows into Singapore rose to SG$235 billion – that is 1.6 times the SG$144 billion recorded in 2019, pre-pandemic, and 2.9 times the SG$80.6 billion garnered in 2013.
FDI plays an essential role in Singapore’s economic development, with foreign enterprises contributing a sizeable nominal value add of roughly 70% despite accounting for only 20% of total companies registered in the country. Notably, analyses by DBS Bank suggests that Singapore’s annual FDI flows are stable in nature, providing a buffer against volatile market conditions.
In our experience, foreign companies play key roles in Singapore’s economy, helping to inject not just money but also cutting-edge innovations and technologies that expand local players’ production and export capabilities across the country’s goods and services sectors. With the rise of digitalisation, these connections have become more important than ever, which is why DBS Bank focuses on delivering digitally enabled, modular banking as a central pillar of our FDI advisory services, alongside our capabilities across cash, trade and lending products.
Local small-to-medium enterprises (SMEs) also benefit from the new business brought about by collaborating with foreign companies as their suppliers, subcontractors and partners.
The impact of this knowledge exchange is tangible, with Singapore’s goods and services surplus as a share of GDP increasing from 23.1% to 37.4% over the course of the last decade.
Behind Singapore’s immense successes is its established reputation as a global business hub and key financial centre, and a highly competitive economy backed by a stable political climate, skilled workforce, and a range of government incentives and schemes.
Opportunities on the road to recovery
While the city state’s gross capital inflows fell in the wake of the COVID-19 pandemic, a full recovery is expected in 2024.
In fact, the country appears robust despite today’s turbulent macroeconomic climate thanks to the rapid responses of regulators. Due to heightened global energy and imported food prices, core inflation had the potential to rise to 6.6%. However, the implementation of an aggressive monetary policy by the Monetary Authority of Singapore (MAS) between October 2021 and October 2022 curbed the worst of it, keeping core inflation at 4.2%.
As the economic headwinds of 2023 fade away, core inflation is expected to drop, and the Singapore government has plans in place to bolster the country’s recovery with a SG$3 billion investment in advanced technologies, decarbonisation, and workforce upskilling.
Amid these policies, we expect continued FDI inflows and MAS’s policy stance to further improve the current economic state and create the ideal conditions to fuel investor interest.
Through our global network and strong capital base, DBS Bank aims to support investors looking to tap into Singapore’s myriad opportunities. From multinationals to SMEs, DBS provides expert FDI advisory services across a variety of industries and sectors. Our diverse portfolio of wealth planning, capital markets and corporate financing solutions enable companies to safely navigate a world of uncertainty and open doors to the wider Asia Pacific region. With a presence in 19 markets and expertise in 14 sectors, we can help steer businesses to grow sustainably within the region and beyond.
