Economists keep S'pore's growth forecast but inflation, Ukraine crisis threaten outlook: MAS poll

Economists see accelerating inflation and the Russia-Ukraine conflict threatening Singapore's growth outlook. PHOTO: ST FILE

SINGAPORE - Private economists left unchanged their forecast for Singapore's economic growth this year but see accelerating inflation and the Russia-Ukraine conflict threatening that outlook, according to a central bank survey released on Wednesday (March 9).

The latest quarterly survey by the Monetary Authority of Singapore was sent out on Feb 17, with all responses received after the outbreak of hostilities in Ukraine on Feb 24, MAS noted.

The economists who responded kept their projection for Singapore’s economic growth in 2022 at 4 per cent but hiked consumer prices by a big margin. 

The median forecast for overall inflation for 2022 was raised to 3.6 per cent from 2.1 per cent in the December survey. The prediction for core inflation - which excludes private transport and housing rental costs - rose to 2.7 per cent from 1.8 per cent previously.

MAS in January had raised its core inflation forecast to a range of 2 per cent to 3 per cent and overall inflation to 2.5 per cent to 3.5 per cent.

The most cited downside risk to Singapore's growth outlook was the sharper-than-expected rise in inflation driven mainly by higher energy and food prices, with an associated increase in the pace of monetary policy tightening by major central banks.

This was cited as a downside risk by 94.5 per cent of respondents and ranked as the top threat to outlook by 38.9 per cent.

Geopolitical tensions from the Russia-Ukraine conflict was the second-biggest downside risk cited in the poll.

The third-ranked downside risk was a further deterioration in the Covid-19 situation, and an associated retightening in public health measures.

The economists were also polled on the upside risks to Singapore's growth outlook.

The prospect of borders being reopened to international travel again emerged as the biggest such factor.

This was followed by a stronger-than-expected expansion in manufacturing, then stronger economic growth in China, driven for instance by policy easing.

The economists polled tipped the economy to expand by 3.7 per cent in the first quarter of this year, moderating from 6.1 per cent growth in the previous quarter.

For 2023, growth is tipped at 3 per cent, with both overall and inflation seen easing to 2.4 per cent.

As to how sectors of the economy will fare this year, the survey showed that accommodation and food services is expected to lead the way, with growth forecast at 9.1 per cent.

Construction was next with growth tipped at 9 per cent.

However, the forecasts for both sectors are actually lower compared with the December survey. Construction growth was cut from 15.8 per cent, and accommodation and food services from 9.6 per cent.

The growth rate for manufacturing was upgraded to 4.1 per cent, from 3.3 per cent previously, while wholesale and retail trade growth was raised to 3.7 per cent from 3.2 per cent.

The forecast for finance and insurance was unchanged at 4.1 per cent.

The 2022 forecast in the survey for Singapore's unemployment rate was unchanged at 2.2 per cent.

A majority expect corporate profits and private residential property prices to remain stable this year. 

However, they also cited the risk of a tightening in global financial conditions, an escalation in geopolitical tensions, and a faster-than-expected pickup in inflation that could potentially weigh on financial markets and lending conditions in Singapore.

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