Singapore GDP expected to grow from 3-5 per cent this year amid post-pandemic recovery
- Singapore’s plans to relax travel and social distancing measures could spark growth for city state’s GDP
- Easing of coronavirus restrictions are expected to take place after current wave of infections subsides
-Singapore reaffirmed its 2022 economic growth forecast, and raised its reading for last year, as its recovery from the pandemic stabilises and it seeks to ease virus restrictions.
Gross domestic product is projected to expand 3 per cent to 5 per cent this year, the Ministry of Trade and Industry said on Thursday, reiterating its November estimate. It also upgraded 2021 growth to 7.6 per cent, from an earlier 7.2 per cent.
Growth this year could get a boost as the city state aims to ease travel and social distancing restrictions after the current wave of Covid-19 infections passes, potentially bolstering the still-struggling travel and retail sectors. That progress toward reopening contrasts with its regional hub rival Hong Kong, which has seen prospects downgraded amid its stringent virus measures.
Singapore’s planned further easing of restrictions, announced Wednesday, “should bode well” for this year, said Selena Ling, head of Treasury Research & Strategy at OCBC Bank in Singapore. “There is potential upside risk to the 3 per cent-5 per cent forecast if border opening and safe management measures relaxations accelerates.
The Singapore dollar was trading up about 0.1 per cent against the US dollar in early morning trading on Thursday.
The data also comes one day before the closely watched budget presentation, which is expected to steer finances back toward a fiscally conservative stance and a modest budget surplus, with potentially the most aggressive tax increases in years. Officials said in a briefing Thursday that the current growth forecast does not account for a possible increase in the Goods and Services Tax, which is expected in the budget speech.
Prospects for “outward-oriented” sectors such as manufacturing and trade will remain strong this year amid the global recovery, the ministry said in a statement, while aviation and tourism-related activity is expected to slow amid risks for recurring Covid-19 outbreaks.
Downside risks
The trade ministry also flagged downside risks from slowing external demand, particularly from the US, Europe and China, citing concerns over supply chain bottlenecks, higher energy prices and the potential for financial instability amid tightening monetary policies in some countries.
The upgrade Thursday to last year’s GDP figure comes alongside a narrower estimate of 2020’s contraction, to 4.1 per cent from 5.4 per cent earlier.
“The revisions suggest the economy’s output gap is probably much smaller and near to being closed, implying more inflationary pressure than previously thought,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group in Singapore.
Authorities are also already facing the sharpest rise in headline consumer prices in eight years, which forced a surprise tightening of monetary policy last month by the central bank.
