Growth forecast for SG ‘unchanged’ despite easing of restrictions

Even a near-term upgrade is 'unlikely', says an expert.

Despite the easing of restrictions in Singapore, experts retained their growth forecast for the country at 3% to 5%.

OCBC Treasury Research explained that “the anticipated turbo growth boost” from the lifting of major restrictions is  “unlikely to fully offset the potentially demand dampening effects from overly hawkish global central banks amidst the persistent inflation theme.”

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“Note that the IMF [International Monetary Fund], FOMC [Federal Open Market Committee], ECB [European Central Bank] had been downgrading their respective growth forecasts due to the heightened geopolitical uncertainties and the elevated inflation, even though China has a rather ambitious growth target of around 5.5%,” OCBC said.

“Should the major economies slow down more than expected, whether due to geopolitical uncertainties (since fresh sanctions against Russia looks imminent) or policy mistakes (with the FOMC gunning for at least another six more hikes this year), then there could be a spillover effect to external demand for Singapore’s NODX,” it added.

Even a near-term upgrade in Singapore’s gross domestic product would be unlikely, saying the first quarter of 2022 will be more subdued compared to the fourth quarter of 2021 “partly due to seasonal effects and the uptick in Omicron cases both globally and domestically as well as the geopolitical uncertainties pertaining to Ukraine,” OCBC said.

On the brighter side, the easing of restrictions will still bring a faster improvement in the number of visitor arrivals, food and beverage (F&B) spending and private consumption appetite in general in the coming months which are all key to a more robust and broad-based recovery for Singapore.

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“The moves to relax the number of people dining-in and allowing alcohol sales etc may be an important lifeline for the domestic F&B, retail and entertainment industries,” OCBC said.

“Moreover, the local manufacturing sector already had a high growth base last year and may face some headwinds going ahead from the global supply chain disruptions arising from the geopolitical uncertainties as well as China’s dynamic COVID strategy, which saw recent lockdowns of key cities,” it added.