Amid inflation and bills growing more expensive, Singaporeans have become increasingly concerned about future economic challenges.
The Ministry of Trade and Industry (MTI) has addressed these concerns, stating that Singapore is unlikely to face a recession next year.
However, global economic risks may persist in the coming months.
Minister for Trade and Industry Alvin Tan announced this to Parliament on Monday (4 Jul).
He was responding to questions by other MPs on the upcoming economic forecast. Thus far, local economic activity has been “resilient” despite increasing inflation.
Mr Tan added that currently, the Singapore economy would likely expand at the lower end of a 3% to 5% range.
Policymakers are expecting growth to moderate further in 2023. Conversely, they are not expecting a recession or stagflation.
However, Mr Tan acknowledged that significant risks would persist in the global economy.
The Russia-Ukraine conflict may escalate in the coming months. In addition, there could be more severe disruptions to the global supply chain.
Other countries are also rapidly tightening their monetary policy, and the Covid-19 pandemic is ongoing. The combination of all these factors will have a significant effect.
As a small and open economy, Singapore cannot avoid these external developments. This is already evident in rising food and energy costs.
According to The Straits Times (ST), the latest data also showed headline inflation rising to 5.6% in May, the highest since Nov 2011. Core inflation also rose to 3.6% in May, the highest since Dec 2008.
In light of the increase, Mr Tan said:
Inflation is likely to pick up further in the coming months but should start to moderate towards the end of the year if external inflationary pressures recede.
Official estimates for headline inflation are projected to remain between 4.5% to 5.5%. Meanwhile, core inflation will come in at between 2.5% and 3.5%.
Despite rising inflation, Mr Tan noted that Singapore’s economy grew by 3.7% year-on-year in the first quarter.
Non-oil domestic exports and industrial production increased in April and May by 9.3% and 10% year-on-year respectively.
Retail, food and beverage sales have similarly increased by 8.4% and 6.9% in April.
The rise is a result of “firm” consumption spending, said Mr Tan. He also pointed out that the high inflation rates did not lead to significant cutbacks in household consumption, partly due to the easing of pandemic restrictions.
For the rest of 2022, Mr Tan assured citizens that the recovery in international travel and domestic demand would help offset the fall in external demand.
Mr Tan also addressed the issue of rising global interest rates in response to spiking inflation.
Singapore’s domestic interest rates have correspondingly increased as well. However, Singapore’s dollar strengthening will help to moderate the resultant fallout.
As a result of increasing interest rates, lending and mortgage rates have also gone up.
Mentioning this, Mr Tan said:
As global interest rates could increase further, businesses and households should bear in mind the rising cost of borrowing when making borrowing decisions.
He also stated that the government would address these challenging economic conditions with three methods.
The first is maintaining a stable macroeconomic environment, enabling businesses to operate and invest confidently.
The Monetary Authority of Singapore (MAS) has also tightened monetary policy three times since Oct 2021. The appreciation will hence help with imported inflation.
In addition, the government has announced a S$1.5 billion support package, which will assist Singaporeans.
MTI has also promised to continue attracting investments and fostering new growth engines.
Singaporeans have already started to feel the pressure with rising food costs and electricity bills.
However, Mr Tan’s announcement gives us hope that there won’t be a recession or stagflation in the foreseeable future.
Hopefully, the support package, alongside other measures, will assist Singaporeans in coping with these challenging economic conditions.
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Featured image by MS News.
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