Singapore: The Monetary Authority of Singapore (MAS) stated on Thursday (October 28) that Singapore’s economy should return to the path of recovery and is expected to expand at a “slower but still higher than trend” rate in 2022.
MAS stated in its latest macroeconomic assessment that the country’s economy is expected to grow by “6% to 7%” in 2021.
The authorities added: “Unless the virus evolves or other global developments make downside risks a reality, it should experience slower but still above-trend growth in 2022.”
ECONOMIC OUTPUT RETURNS TO PRE-PANDEMIC LEVELS
According to the report, since the beginning of this year, Singapore’s economic growth has experienced “intermittent”, as a new wave of COVID-19 infection has led to several rounds of tightening of policies and subsequent relaxation of movement restrictions.
It added that due to these restrictions, domestic-facing activities are “restricted,” but external-facing trade-related and modern services have performed better and provided some support for overall growth.
However, the HKMA pointed out that the decline in economic activity in the second and third quarters was not as severe as during the circuit breaker period in the second quarter of 2020, because the measures this year are generally less stringent.
MAS stated that the company has adjusted “to some extent” by switching to other ways of doing business.
In the third quarter of 2021, overall economic output will return to pre-pandemic levels, although there are still significant differences in the performance of various industries.
MAS stated: “Although the trade-related modern service clusters were approximately 10% and 5% higher than the pre-pandemic levels in the third quarter, the domestic-oriented clusters were still approximately 10% lower than their pre-crisis levels.”
ECONOMIC OUTLOOK
With the reopening of the economy, it is expected that the economy will continue to expand in the coming quarters.
MAS added that domestic-oriented industries should see “a gradual pick-up in activity”, while the prospects for tourism-related industries have also improved slightly.
Singapore recently announced the expansion of its vaccination travel itinerary to more countries, including the United Kingdom and the United States.
The report added that due to the prevalence of large numbers of COVID-19 cases in the community, the recovery of consumer-oriented industries (such as food and beverages, retail, and land transportation) will be hindered in the beginning of the fourth quarter.
These restrictions mean that social gatherings and dining groups are smaller.
MAS said: “Nevertheless, online food and retail sales should receive some support, and businesses and consumers are increasingly inclined to this.”
A wider reopening of the economy by the end of the year should improve passenger flow for retail businesses and restaurants, although the demand for foreign tourists is expected to only gradually recover.
MAS stated that travel demand “is not expected to pick up rapidly or sharply in the short term”, and that travel-related industries are expected to have a “bumpy road to recovery.”
Singapore began to lift some border restrictions at the end of the third quarter of 2021. As of October 25, approximately 7,000 vaccination passes have been issued to short-term tourists. However, this accounted for less than 1% of monthly arrivals before the pandemic, MAS said.
MAS added that the strong rebound in tourism-related industries may only achieve a “greater” elimination of border barriers in 2022, and it is expected that only after 2022 will it be able to return to pre-pandemic output levels.
At the same time, the recovery of major trading partners and the “continuous strengthening” of global electronic demand will support trade-related and modern service industry clusters.
THE LABOR MARKET AND CORE INFLATION ARE EXPECTED TO PICK UP
MAS stated that as the domestic economy recovers, the labor market may continue to recover in the next few quarters.
The report pointed out that after rising to 3.7% in July, the resident unemployment rate dropped to 3.6% in August, indicating that the weakness in the labor market should continue to be absorbed.
The report added that residents’ wage growth also picked up in the second quarter, making wage levels “return to pre-COVID trends.” According to reports, companies in a range of industries have also ended the wage freeze and reversed wage cuts.
As the weakness in the labor market dissipates in 2022, residents’ wage growth may be firm.
MAS added that the cost of freight, consumer durables, energy and food commodities has risen and may remain high in the short term as the global mismatch between supply and demand continues. These domestic and import cost pressures “should support Singapore’s core inflation to rise steadily in 2022”.
MAS stated: “In particular, the resumption of private consumption in the context of the wider economic reopening next year should allow more accumulated commercial costs to be passed on to consumer prices.”
MAS’ core inflation is expected to reach the “upper limit” of the 0% to 1% forecast range in 2021, and further rise to 1% to 2% in 2022, the agency said.
CPI (Consumer Price Index)-The inflation rate for all commodities is expected to reach around 2% this year, and will average 1.5% to 2.5% next year.
