Singapore warns of uncertain economic outlook, keeps growth view

SINGAPORE’S economic outlook has turned more uncertain as tighter financial conditions weigh on global demand and China’s reopening is doing little more than boosting tourism, according to its central bank.

“The risks to growth in the global economy and in Singapore are tilted to the downside,” the Monetary Authority of Singapore (MAS) said in its biannual Macroeconomic Review published last Wednesday. “Given the increase in banking industry stresses across global markets since March, lending conditions are expected to tighten even further, translating to a sharper slowdown in credit growth and weaker economic activity in the period ahead.”

For now, the authority retained its view that the city-state’s economy will expand 0.5%-2.5% this year, even as it flagged the possibility of a technical recession in the US later this year.

Trade-reliant Singapore has had external risks in sharp focus this year, with the possibility of recession in the US and Europe still on radar even as much of last month’s banking turmoil didn’t hit Asia hard. The fragile global growth outlook has pushed more central banks to pause or end their policy tightening campaigns. The MAS left its exchange-rate settings unchanged in April as inflation eases.

Although China’s reopening was expected to support trade in Asia, those benefits are yet to materialise.

“Outside of tourism, the boost from China’s reopening on Asian exports is projected to be relatively muted,” the MAS said. “The overall contribution from China to regional manufacturing value chains will be weighed down by faltering global demand.”

While the fall in demand has been accompanied by a moderating pace in price increases, Singapore officials have nonetheless flagged that prices are expected to stay elevated.

In a separate report last week, core inflation, a key gauge tracked by the central bank, slowed for the first time since October. The reading cooled to 5% in March from a 14-year-high 5.5% in the previous two months.

MAS MD Ravi Menon recently warned that it was too early to declare victory on inflation and said the central bank will be ready to do more if needed. — Bloomberg

  • This article first appeared in The Malaysian Reserve weekly print edition