Singapore’s GDP growth will moderate next year after a 2021 rebound by Reuters

By Chen Lin and Aradhana Aravindan

SINGAPORE (Reuters) – Singapore’s economy is expected to grow by around 7% in 2021, at the top of the official forecast period, and will open at a slower pace next year as an uneven recovery continues in all sectors, the government said on Wednesday.

The Ministry of Trade and Industry (MTI) predicts that the economy will grow by 3% and 5% next year.

“The recovery of different sectors of the economy is expected to be uneven in 2022,” said Gabriel Lim, Permanent Secretary for Trade and Industry.

It expects foreign-oriented sectors such as manufacturing and wholesale trade to remain strong, and activities in the aviation and tourism-related sectors would remain below pre-COVID levels by 2022.

Gross domestic product (GDP) grew 7.1% year-on-year in the third quarter, MTI said, higher than the 6.5% spread seen by the government’s preliminary estimate and analysts in a Reuters poll.

By quarter-on-quarter season, the economy grew by 1.3% in the third quarter.

The small, open economy, which has fully integrated about 85 percent of its 5.45 million population, has eased some of the security measures of COVID-19 this week and opened up quarantine-free travel routes with several countries.

“Recovery is definitely underway, reopening borders and easing mobility restrictions can help sectors that are facing consumers,” said economist Lee Eng Ye Maybank Kim Eng. “But it’s still going to be a slow pace of normalization.”

MTI said long supply disruptions, along with a stronger rise in demand, as well as rising energy commodity prices, could lead to more sustained inflation.

External inflationary pressures are likely to continue to rise, and wage growth is expected to strengthen as the domestic labor market continues to recover.

Globally, policymakers have focused on the inflationary risks of supply cuts and the recovery of the global economy.

The Singapore central bank tightened its monetary policy in a surprise move at a recent meeting in October. At least five economists expect the Singapore Monetary Authority (MAS) to act again at its next policy meeting in April.

The MAS will look closely at the dynamics of inflation and will be vigilant about the evolution of prices when it decides on the next policy move, expected in April, Edward Robinson, its deputy director, told the media.

Singapore maintained this year’s inflation forecast at around 2%, compared to an average of 1.5-2.5% in 2022.

This week’s data showed that Singapore’s main price gauge rose at a nearly three-year pace in October, driven mainly by higher services and food inflation, while inflation rose at its fastest pace since March 2013.

“If we continue to outpace inflation in the first quarter of next year, and all of these supply chain disruptions aren’t eased, the question then is how aggressive (tightening) it can be,” said Selena Ling, director. He added that he sees the Treasury’s research and strategy at the OCBC as “very likely” to tighten in April.

The economy recorded a record 5.4% decline in 2020 as a result of the COVID-19 pandemic.