Singapore’s economy grew more than expected in the third quarter compared with the same time last year, according to initial estimates released by the government on Friday.
Meanwhile, the country’s central bank tightened policy for the fifth time in the past year, in line with expectations.
Gross domestic product for the July-September quarter came in at 4. 4 percent, above analysts’ 3. 4 percent forecast in a Reuters poll, and in line with second-quarter growth.
The Southeast Asian country has avoided a technical recession, with quarterly GDP expanding by 1. 5% on a seasonally adjusted basis, following a 0. 2% contraction in the current quarter compared to the first quarter.
The Ministry of Trade and Industry in August forecast Singapore’s GDP for 2022 at 3% to 4%, from a previous forecast of 3% to 5%.
Singapore’s economy has “a bit of wind under our wings” with the return of events, meetings and tourism, said Selina Ling, chief economist at OCBC. This will offset weakness in the production sector, he said.
There is a peak of uncertainty in 2023, Ling said, predicting a diversity of expansion of between 1% and 3% and explaining that there are imminent risks.
Under pressure that “there’s a threat of trouble depending on what’s happening with primary economies” and cited as an example the U. S. Federal Reserve’s aggressive rise in loan prices. Despite slowing growth.
“I think that’s what’s on a lot of people’s minds in those days, at what point policymakers would start turning around and saying, okay, the slowdown in expansion has gone pretty far,” he told CNBC’s Squawk Box Asia.
Alex Holmes, an economist at Oxford Economics, said a repeat of Singapore’s 1. 5% quarterly increase in GDP is unlikely, pointing to possible recessions in export markets. Inflation and interest rates will also be headwinds to domestic demand, he said in a note.
Meanwhile, the Monetary Authority of Singapore has tightened policy in a widely expected move, as emerging prices continue to weigh on the economy.
The central bank said it would refocus the midpoint of its exchange rate policy range, known as Singapore’s nominal effective exchange rate, S$NEER.
Singapore controls its policy through its exchange rate rather than its interest rates, and can also adjust the slope and bandwidth. It manages the strength or weakness of the Singapore dollar against a basket of currencies of its major trading partners.
Policy diversity is now in an “ideal zone” given considerations of inflation and weaker global expansion prospects, analysts at DBS Group Research said in a note on Friday. make political decisions. “
For its part, the central bank pointed to considerations on emerging prices.
“Core inflation will continue to rise in the coming quarters as imported inflation remains high and a tight hard labor market supports strong wage increases,” the MAS said.
The Singapore dollar last traded at 1. 4234 against the dollar.
Regarding the expected accumulation in the goods and facilities tax (GST) scheduled for January 2023 and 2024, the central bank said it will “lead to a one-time accumulation in the level of value,” although it will affect inflation. “It is expected to be transient. “
The MAS said that, due to the effects of the tax increase, it expects Singapore’s core inflation to remain above trend between 2. 5% and 3. 5% and headline inflation between 4. 5% and 5. 5%. In August, core inflation reached 5. 1%, while headline inflation was 7. 5%. %
OCBC’s Ling said GST increases will play a bigger role in boosting inflation.
The central bank “referred to the increase in GST, but also indicated that there would be structural points underlying the inflation story,” he said.
“For the rest of 2023, it will rely on external resources, such as energy, herbal fuel and on the domestic front,” he said, pointing to a tighter hard labor market and emerging wages.
Late on Friday afternoon, Singapore’s Ministry of Finance announced a package of 1500 million S$1500 million ($1050 million) to deal with emerging inflation. .
Do you have confidential news tips? We to hear from you.
Sign up for loose newsletters and get more CNBC in your inbox
Get this in your inbox and more information about our and services.
© 2022 CNBC LLC. All rights reserved. A department of NBCUniversal
Data is a real-time snapshot * Data is behind by at least 15 minutes. Global monetary and industry news, inventory quotes, and market knowledge and analysis.
Data also by