WED, DEC 08, 2021 Janice Heng

PRIVATE-SECTOR economists expect Singapore’s full-year growth to be 6.9 per cent in 2021 and 4 per cent in 2022, according to the Monetary Authority of Singapore’s (MAS) latest quarterly survey of professional forecasters released on Wednesday (Dec 8).

This is comparable to the government’s forecasts of “around 7 per cent” for 2021, and 3 per cent to 5 per cent for 2022. For the fourth quarter, economists expect growth of 4.6 per cent year on year.

An escalation in the Covid-19 situation is still seen as the top downside risk, but concerns have increased over the risks of a China slowdown and global monetary policy tightening, with inflation expectations also rising.

The survey reflects the views of 22 economists and analysts, and not the MAS’s own views or forecasts.

The economists’ latest full-year forecast is a slight improvement from the 6.6 per cent figure in the last survey in September. Growth expectations have also risen for finance and insurance, construction, wholesale and retail trade, and non-oil domestic exports.

But they have halved for accommodation and food services, to 3.1 per cent, down from 5.9 per cent in September.

Median forecasts for 2021 and 2022

Year-on-year change (%)

Expectations also worsened for private consumption to 4.8 per cent growth, down from 5.6 per cent before. But this is due mainly to the distortion of growth in 2021, due to the low base in 2020, said CIMB Private Banking economist Song Seng Wun: “Sequentially, I think we remain hopeful.”

There is still “huge pent-up consumer demand” for in-person activities, including food and beverage services, he added.

In the labour market, the unemployment rate is expected to be 2.6 per cent at year-end, a slight improvement from the previous survey’s 2.7 per cent forecast.

Inflation expectations have risen, with economists expecting full-year headline inflation to be 2.1 per cent, up from 1.7 per cent in the September survey, and core inflation to be 0.9 per cent, up from 0.7 per cent before.

For the fourth quarter, headline and core inflation are expected to be 3 per cent and 1.5 per cent respectively.

In 2022, headline inflation is likely to be unchanged, but core inflation is expected to rise to 1.8 per cent.

While inflationary pressures may not intensify per se, they should start to broaden, with costs of inputs – including higher wages – being passed on to a broader range of services, said Song.

Inflation has also emerged as one of the top 3 downside risks that respondents see for financial market and lending conditions in Singapore, cited by 25 per cent of economists.

The possibility of global financial conditions tightening remains the top risk, followed by an escalation of the Covid-19 pandemic.

Most respondents continue to expect corporate profitability to improve and private residential property prices to rise in 2022, but they were evenly divided on whether corporate bond spreads would widen, remain stable, or narrow.

The survey was sent out on Nov 24, just 2 days before the World Health Organization designated the Covid-19 Omicron variant as a variant of concern.

“The survey forecasts are likely premised on the view that Omicron is no more lethal than Delta and current vaccines are effective,” said Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye.

“The growth projections will have to be downgraded if Omicron turns out to be more lethal or require more effective vaccines,” they added.

In general, economists may be waiting for more clarity on the severity of Omicron before factoring it into their predictions, said Song.

In the latest survey, Covid-19 escalation remains the most-cited downside risk for growth, though no longer unanimously. Second is a slowdown in China, cited by two-thirds of respondents, up from less than a third in September.

Supply chain disruptions are no longer among the top 3 risks. Instead, monetary policy tightening – “arising, for instance, from a larger-than-expected pick-up in inflation”, said the MAS – has risen in economists’ estimation, with half of them citing it, up from 15 per cent previously.

As for upside risks to these forecasts, the reopening of borders remains top, cited by 77.8 per cent of respondents, up from 70 per cent in September.

A stronger-than-expected expansion in global manufacturing continues to be cited by about two-fifths of respondents, with a similar proportion citing stronger-than-expected global growth.