SINGAPORE- Recent data indicates better-than-expected but also sluggish growth in Singapore after narrowly avoiding a specialized recession earlier this year. & nbsp, However, analysts warn that if the United States and Chinese economies fall short of their baseline projections, the city-state’s trade-reliant economy may slow down for the rest of this year and even into 2024.
According to advance estimates recently released by the Ministry of Trade and Industry ( MTI ), the gross domestic product ( GDP ) increased by 0.7 % year over year in the July to September quarter. The economy grew by 1 % over economists’ predictions and faster than the tepid 0.1 % growth in the quarter before it on a quarter-on-quarter seasonally adjusted basis.
The Monetary Authority of Singapore, the city-state’s central bank, cited” muted” growth prospects in the near future and expectations of full-year growth to come in” at the lower half” of the official forecast range of 0.5 % to 1.5%” in a policy statement on October 13. It was also stated that by the second half of the following year, growth in Singapore’s main trading partners should eventually pick up.
A study word reviewed by Asia Times found that researchers at the research agency BMI Research were less optimistic about a recovery in 2024. Due to anticipated slowdowns among Singapore’s major trade partners and fiscal consolidation, the independent monitor revised its full-year growth forecast downward from 1.1 % to 0.8 % and predicts a further deceleration to$ 0.5 % in 2024.
The government of Singapore is” constitutionally required to run a sensible budget over the course of its term, which ends in 2025, and it must make up for the sizable imbalances it ran to support the economy during the pandemic.” Another reason why Singapore’s smaller and available economy will suffer greatly from the slowdowns we anticipate in the US and China is a weak recuperation in exports growth, according to BMI.
According to the report, personal consumption is likely to continue, with Singaporeans’ real disposable earnings being supported by easing inflation and challenging labor market problems into the coming year. However, with an import downturn, businesses are likely to become cautious, meaning that investment growth is expected to be” well below pre-pandemic rates.”
The city-state’s main non-oil home exports, which researchers use as a gauge for additional demand, contracted for the 12th subsequent month in September, falling by 13.2 %, with both the technology industry and those outside of it showing signs of decline. According to official data, the export decline last month was less severe than the 22.5 % drop in August and the 20.3 % decline in July.
The Singapore economy’s directly oriented sectors have already been hampered by the weakening world economy and poor manufacturing demand. According to Selena Ling, chief analyst at Oversea – Chinese Banking Corp in Singapore, any more decline in the political or economic environment could pose negative threats.
Manufacturing, which makes up one-fifth of the city-state’s GDP, saw an annual growth of 5 % in the second quarter following a 7.7 % decline during the preceding quarter that, according to Ling, was less than anticipated. She continued,” In the future, it might be more important to see the service and development sectors, which had been reducing the external need moderation, remain resilient.”
Tan Wen Wei, an Asia analyst at the Economist Intelligence Unit( EIU ), observes that weak domestic demand in China has already had an impact on Singapore’s growth in the fourth quarter and into 2024 as a result of the city-states’ slumped property sector and sluggish export performance.
Tan said the major economic impact of the issue may come from higher imported power costs, pointing out the uncertainty surrounding Israel’s anticipated military activity in Gaza. Although oil prices had increased following this affair, he claimed that a sharper escalation involving Iran may further disrupt the supply chains and oil production, raising the price even further.
In Singapore, rising oil prices would result in rising energy costs, inflation, and a 8 % to 9 % increase in the Goods and Services Tax ( GST ) in January 2024, in addition to other planned price increases for public transportation and water. Tan stated to Asia Times,” Higher inflation will present a drag to personal consumption and growth as resulting.”
The MAS noted that core inflation, the central bank’s preferred customer value test that excludes private transportation and lodging costs to better represent household bills, has slowed and is anticipated to widely rise over the course of the following year in its October 13 policy statement.
For the third month in a row, core inflation has decreased from its 14-year high of 5.5 % in January and February to 3.4 % in August. Although the main banks maintains that an average core inflation rate of just under 2 %, which is close to its historical suggest, is consistent with general price stability in the economy, the MAS does not have an obvious inflation target.
Instead of using interest rates as its primary policy instrument to control inflation, the MAS uses the transfer price of the Singapore money weighed against a basket of assets from the city-state’s major trading partners. After five rounds of strengthening between October 2021 and 2022, it has maintained the current price of currency recognition since April of this year.
” Rising prices continues to be the main barrier to looser plan.” However, we don’t believe such a move is far off given that core inflation is expected to fall near to target rapidly. According to Alex Holmes, a lead economist at Oxford Economics, supply-side elements generally point to more disinflation away despite some top challenges from higher energy and energy costs.
Holmes continued,” We believe that the majority of analysts are underestimating how quickly the MAS may move once it is allowed. ” We believe the MAS will start loosening policy, perhaps by reducing the side of the policy group in January, given that core inflation is expected to close in on 2 % by early next year and the economic landscape will probably still be melancholy.”
Additionally, the central bank declared that starting in 2024, it may increase the frequency of its policy choices to a weekly basis. It now does but on a half-yearly basis, with comments being released in April and October. According to observers, the change will give the MAS more freedom than before to communicate and adjust to changing economic conditions.
In the previous two decades, inflationary situations had forced the central bank to make off-cycle adjustments half. According to the EIU’s Tan, the MAS would be able to” react more nimbly to uncertainties surrounding growth and inflation, amid a more volatile political background” if monetary policy review was coordinated with weekly progress development estimates. & nbsp,
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