Singapore’s economic growth likely slowed in Q1, complicating MAS’ task

SINGAPORE – Singapore’s economy is likely to have expanded at a slower pace in the first quarter, posing a challenge for the central bank as it

seeks to balance containing persistent inflation

with efforts to shore up weakening growth.

Preliminary data due on Friday is seen showing gross domestic product expanded 0.6 per cent in the January-to-March period from a year ago, according to a median forecast of 19 economists in a Reuters poll, due to weaker external demand.

Singapore’s economy expanded 2.1 per cent year on year in the fourth quarter of 2022.

Manufacturing, one of its main growth engines, has contracted for five consecutive months mainly due to a slowdown in demand for semiconductors globally, along with non-oil domestic exports.

Growth in the services industry is expected to help offset the plunge in manufacturing, analysts said.

“The pickup in visitor arrivals, including from China, will benefit the hospitality and food and beverage industries. Private consumption also remains supported due to the healthy labour market conditions,” said OCBC Bank chief economist Selena Ling.

Looking ahead, the services sector “should still continue to underpin GDP growth in the coming quarters”, she added.

The trade-reliant economy grew 3.6 per cent last year, slowing from an 8.9 per cent expansion in 2021.

The Government has projected GDP growth of 0.5 per cent to 2.5 per cent for this year, saying that while the growth outlook for aviation- and tourism-related sectors has improved, externally oriented sectors remain weak given the broader slowdown in the global economy.

The gloomy outlook, combined with persistent inflation, has heightened analyst debate over whether the Monetary Authority of Singapore (MAS) should tighten policy again at its scheduled review, also on Friday.

Singapore’s core inflation has remained at around a 14-year high of 5.5 per cent in recent months.

The MAS has said core inflation is likely to stay at about 5 per cent for the early part of 2023. The bank has tightened monetary policy five times in a row, the last move being in October 2022.

Six out of the 17 economists polled by Reuters expect the MAS to make no changes to the monetary policy, citing the need to bolster economic growth. Others expect the MAS to tighten, but are divided on which levers the central bank should adjust.

Singapore removed all of its Covid-19 curbs in February this year and expects the tourism sector to recover to pre-pandemic levels by 2024. REUTERS