IMF lowers forecast for S’pore economy to 3.7% growth this year

SINGAPORE – The International Monetary Fund (IMF) has cut its economic growth forecast for Singapore, in line with its recent warning that it will downgrade its estimates for the global economy later this month.

The IMF said Singapore’s economy will grow at 3.7 per cent this year, in a country report issued on Friday (July 22) after consultations with officials here. 

The latest estimate is less than the forecast of 4 per cent growth the fund had made in May.

The  IMF said the pace of growth will be slower this year compared to the 7.6 per cent surge in 2021 as trade-related sectors may moderate amid supply constraints, while recovery in the hardest hit sectors of tourism and aviation-related, consumer-facing and construction has only just begun.

The IMF, however, kept its forecast 4.8 per cent for Singapore’s headline inflation – which covers all goods and services.

The Government’s own outlook is for growth to come in at the lower half of its 3 per cent to 5 per cent forecast range. The Monetary Authority of Singapore (MAS), meanwhile, just raised its headline inflation forecast for 2022 to 5 per cent to 6 per cent.

IMF said growth in Singapore is being driven by pent-up demand as the economy reopens, amid the relaxation of most Covid-19 curbs on mobility.

“Singapore’s skilful containment measures, effective vaccination campaign and decisive policy support helped the economy to recover impressively,” the report said.

However, the fund warned: “The outlook is subject to significant uncertainty and risks are titled to the downside.”

Inflation has been driven up by rising domestic cost pressures, as well as external factors such as the war in Ukraine, which has pushed up commodity prices and tightened supply conditions.

IMF said the risks stem mostly from the Ukraine conflict and the related sanctions imposed on Russia, China’s growth slowdown, and interest rate hikes in advanced economies to tame inflation.

It also said that the threat of vaccine-resistant new Covid-19 variants continues to linger.

With the recovery in domestic demand, IMF said Singapore’s current account surplus is expected to decline to 13.2 per cent of gross domestic product in 2022 from 18.1 per cent in 2021.

Current account is the broadest measure of the health of a country’s external sector and its ability to meet its foreign payment obligations.