Singapore maintains 3-5% growth forecast for this year as Covid-19 curbs ease

Singapore's economic growth will stay the course this year, aided by rising demand for goods and services as pandemic-related curbs are relaxed here and abroad.

Gross domestic product (GDP) is projected to grow by 3 per cent to 5 per cent this year, the Trade and Industry Ministry (MTI) noted yesterday, reiterating its forecast announced last November.

Analysts said the latest data, which also showed GDP expanded more last year and contracted less in 2020 than earlier estimated, highlights the resilience of Singapore's economy.

But the MTI said the outlook for various sectors remains uneven amid risks related to the pandemic, supply bottlenecks, inflation and geopolitical issues. It noted that prospects for outward-oriented sectors such as manufacturing remain strong, given the continued global recovery.

"In particular, manufacturing is projected to continue to expand, albeit at a more moderate pace following the strong out-turn last year, supported by sustained global demand for semiconductors and semiconductor equipment," it said.

Growth in the information and communications, and finance and insurance sectors is expected to remain healthy. Still, expansion in the aviation-and tourism-related sectors may stay slow as travel demand is likely to take time to recover.

Moreover, the accommodation sector will be weighed down as government demand for hotel rooms to serve as quarantine facilities falls and staycation demand drops with the relaxation of travel restrictions.

"Overall, activity in these sectors is expected to remain below pre-Covid-19 levels," said the MTI.

Activity in the construction, and marine and offshore engineering sectors is projected to keep recovering on the back of the easing of border restrictions on the entry of migrant workers from South Asia.

Air travel and visitor arrivals are also expected to improve with looser travel restrictions and more vaccinated travel lanes (VTLs).

Permanent Secretary for Trade and Industry Gabriel Lim told a briefing that Singapore's external demand outlook deteriorated slightly in recent months as the Omicron wave led to tighter restrictions in many economies.

"Meanwhile, global supply bottlenecks remain and are expected to persist throughout the first half of 2022, thereby constraining industrial production and GDP growth in the near term," he added.

He said the worst-case scenario in the Russia-Ukraine stand-off could dampen the global economy and put oil prices above the US$80-a-barrel baseline assumption made in Singapore's 2022 GDP forecast.

"You can model it every which way, from a short disruption all the way down to a very, very prolonged dampener for not just the global economy, but also for global business stability," Mr Lim noted.

Ms Selena Ling, chief economist and head of treasury research and strategy at OCBC Bank, said the risks cited in the MTI report were not unfamiliar, adding: "But the mitigating factors are Singapore's high domestic vaccination rate, which should pave the way for further easing of restrictions."

UOB economist Barnabas Gan has maintained his 2022 growth forecast at 3.5 per cent, noting: "Singapore's economic prognosis remains optimistic."

Ms Ling said the potential relaxation of Covid-19 curbs and more VTLs mean her 3 per cent to 5 per cent GDP forecast may be a little conservative.