Singapore Sees Slower Growth in 2022 as Recovery Takes Hold


Singapore expects gross domestic product to expand 3% to 5% next year, a slower pace than this year as its rebound from the worst of the pandemic steadies.

The first official forecast for 2022 compares with about 7% this year, the Ministry of Trade and Industry said Wednesday, reflecting the impact from easing pandemic restrictions and a stabilizing global economy.

Manufacturing and trade will remain strong on robust external demand, Gabriel Lim, permanent secretary in the trade ministry, said at a briefing, adding downside risks globally include supply bottlenecks and a resurgence in infections. Travel, consumer and construction will show recovery, though activity levels may not reach pre-Covid levels next year, he said.

Slowing Rebound

The Singapore dollar was little changed at 1.3666 to the greenback as of 10:12 a.m., while the benchmark Straits Times Index rose as much as 0.4%.

The growth outlook comes as the city-state seeks to move on from its biggest surge in virus cases, which had complicated its rollback of social curbs. While the island continues to open up its borders amid a fall in infections, the government has signaled a further easing of restrictions within the country is unlikely this year.

“I expect the growth momentum to rise from here as Southeast Asia’s recovery gains traction into early 2022, and Singapore will benefit from that on top of its own domestic growth drivers,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets in Hong Kong.

Top political figures have reaffirmed their determination to stick to the pace of reopening, trying to assuage concerns over the country’s earlier stop-start restrictions. Prime Minister Lee Hsien Loong described it last week as a “step by step” approach that seeks to avoid needing to dial back measures.

Beating Estimates

The trade ministry on Wednesday also released final readings for third-quarter economic activity, which have bounced back above pre-Covid levels, with GDP rising 7.1% from a year ago. This compares to economists’ forecasts and an advance estimate in October of both 6.5%. Meanwhile, the official 2022 forecast Wednesday compares with a median growth outlook of 4% in a Bloomberg survey of economists.

Global supply chain disruptions are also likely to persist into the first half of 2022, due to the time for bottlenecks to ease and production capacity to ramp up, Yong Yik Wei, the director and chief economist of the trade ministry’s economics division, said at the briefing.

Amid the recovery, inflation concerns have grown in the trade hub, which is highly reliant on imports. Consumer prices last month rose faster than expected, piling greater focus on whether the central bank will further tighten policy at its next meeting in April.

Core inflation will likely continue to inch upwards at least through the first half of 2022, but should gradually ease in the latter part of the year, Edward Robinson, deputy managing director for the Monetary Authority of Singapore, said at the briefing. The central bank is “carefully monitoring” the persistence and pace of price rises before formulating appropriate policy responses, he added.

“With today’s upward revision to GDP and yesterday’s upside CPI surprise, we expect MAS to tighten policy at their April 2022 review,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group in Singapore.