By Ronnie Harui
SINGAPORE--Singapore's economic outlook has improved amid strengthening external demand, the Monetary Authority of Singapore said Wednesday.
Domestic gross domestic product growth in 2021 is forecast to exceed the upper end of the official 4%-6% forecast range, barring a significant setback in activity from a weaker global economic recovery or a surge in locally transmitted Covid-19 cases, the central bank said in its biannual macroeconomic review report.
However, growth outcomes will remain disparate across sectors, the MAS said. The prospects of sectors that have been less affected by the pandemic--especially manufacturing--have brightened, but the prognosis for the worst-hit sectors is weak, as an early, widespread reopening of international borders remains unlikely.
Underlying inflation is expected to pick up gradually this year, in tandem with the upturn in external inflation and stronger domestic demand. The step-up in Singapore's on-year inflation in the coming months will mostly reflect base effects as prices fell in the second quarter of 2020. The pace of increase in inflation should ease in the latter part of this year, as these base effects fade and global commodity prices rise at a more modest pace.
For 2021, core inflation is expected at between 0.0% and a rise of 1.0%. Headline inflation is now tipped to rise between 0.5% and 1.5% versus the prior range of a 0.5% decline to a 0.5% increase, the MAS said.
Earlier in April, the MAS maintained the 0% per annum rate of appreciation of the Singapore dollar nominal effective exchange rate's policy band. There was no change to the width of the band nor to the level at which it is centered.
An accommodative monetary policy stance remains appropriate and would support the narrowing of the output gap and ensure price stability in the economy over the medium term, the central bank said.
Write to Ronnie Harui at email@example.com
(END) Dow Jones Newswires