The path from pandemic to endemic may be bumpy but Singapore’s inoculation effort has paved the way for the reopening of the economy, says DBS Group Research senior economist Irvin Seah.
While Singapore’s Infection count has increased due to the Delta variant and easing of some safety measures, the vaccination process has been “encouraging”, writes Seah in a Sept 21 note.
“We maintain our below-consensus growth forecast of 6.3% in 2021 and 3.2% in 2022. Inflation is expected to average 1.7% in 2021 while core inflation will likely remain elevated. The Monetary Authority of Singapore (MAS) is expected to normalise monetary policy in the forthcoming October meeting,” notes Seah.
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Exports and industrial production (IP) performance have remained robust, but signs of moderation are emerging. China has been the main driver of the export recovery. Slower China growth in 2H2021 will affect export performance going forward, says Seah.
That said, strong demand for electronics globally amid robust investment into new technologies will bode well for manufacturing, says Seah.
Looking within, the externally oriented services sector, which has been a key driver of the recovery, is also showing signs of slowdown. Tourism related and the retail sectors remained depressed due to continued border closure and domestic safe measures.
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Transit and recreational activities have fallen and recovered after the implementation of two rounds on Phase Two Heightened Alert (P2HA) safe measures.
With recovery momentum ebbing, business expectation has generally peaked and for some sectors, are tapering off. This could point to relatively weaker growth in services ahead, he adds.
Job vacancies outpaced the number of unemployed persons on strong hiring impetus. Yet, there has been net employment losses, suggesting skill mismatch and a tepid recovery, writes Seah.
Purchasing managers’ indices (PMIs) in the key markets have peaked, reflecting a slowdown in the recovery momentum and plainly, economic normalisation.
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