Singapore Economy to Continue on Expansion Path, MAS Says

By Ronnie Harui

SINGAPORE--Singapore's economy is expected to continue on its expansion path in the coming quarters as movement restrictions are progressively eased in line with the government's reopening plans, the Monetary Authority of Singapore said Thursday.

The country's economic growth has been subjected to "fits and starts" since the start of 2021, as successive waves of Covid-19 infections have resulted in the reimposition and subsequent lifting of movement restrictions, the central bank said in its biannual macroeconomic review report.

The domestic-oriented sector should experience a gradual pickup in activity, while prospects for the travel-related sector have improved slightly even though its recovery is likely to be protracted, the MAS said. The trade-related and modern-services clusters will be supported by recoveries in major trade partners and continued strength in global electronics demand.

Singapore's economy is expected to grow 6%-7% in 2021. It is expected to post a slower but still-above trend pace in 2022, barring the materialization of downside risks arising from the evolution of the virus or global economic developments.

Underlying inflation in Singapore is expected to pick up next year on stronger domestic sources of inflation, including some administrative price revisions. Higher business costs, along with recovering private consumption, will support the pickup in services inflation, the MAS said.

Overall import price pressures could persist into 2022 as global supply bottlenecks take time to ease. These factors are likely to dominate and underpin the rise in core inflation even if concerns about virus transmission lead to some near-term weakness in consumption, the central bank said.

Core inflation is expected to be near the upper end of the 0%-1% official forecast range for this year as a whole and is likely to accelerate to 1%-2% in 2022, while overall inflation is projected to be around 2% this year and average 1.5%-2.5% next year, the MAS said.

The central bank's restoration of the Singapore dollar nominal effective exchange rate to a mild appreciation path was appropriate against underlying pressures on inflation, the MAS said, noting its October semiannual review at which it slightly raised the slope of the policy band and left unchanged the band's width and the level at which it is centered.

Import price increases are likely to continue for some time, while business costs in Singapore should firm as the negative output gap closes in 2022, the MAS said.

Write to Ronnie Harui at [e-mail]

(END) Dow Jones Newswires

10-28-21 0044ET