Singapore economy is expected to grow by 5 to 7 per cent for the full year, an upward revision from previous forecast of 4 to 6 per cent. The official forecast by the Ministry of Trade and Industry (MTI) came as the short-term external environment is expected to be favourable to the country’s growth for the rest of the year. MTI said this is because the advanced economies remain on a path of modest recovery.
Specifically, in the US, household consumption will be supported by improvements in the labour market, while in the EU, growth will be supported by rising exports and in emerging Asia, growth is also expected to remain healthy. MTI added that there are also industry-specific factors supporting growth in the Singapore economy. Particularly, growth in the manufacturing sector, which will be boosted by new plant operations in the chemicals cluster.
However, MTI also warned there are several downside risks to growth, including continued concerns of sovereign debt issues in Europe and further increases in oil prices coming from the unrest in the Middle East and North Africa region. And MTI added that in Singapore, a tight labour market will also add to business cost pressures. “Cost pressures remain a concern, given the increase in economic activity and the current tight labour market conditions,” said MTI deputy secretary Kwek Mean Luck. “As supply side constraints become binding, cost pressures could build up further and this would have some impact on business activities. We will continue to watch this closely over the next few quarters.” Wu Kun Lung, an economist with Credit Suisse, said: “Starting from Japan, our view is that this is likely to be transitory. Q2 we will see some impact and most of Q3. But we think the reconstruction effort will start some time later this year and by then, we will see a boost in the GDP growth in Japan and other parts of Asia as well.