Singapore’s Q3 GDP Expected to Remain Sluggish Amidst Inflation Concerns
Singapore’s Economic Growth
Singapore’s economic growth in the third quarter is anticipated to continue at a slow pace as the central bank strives to balance inflation containment and the revival of the post-pandemic recovery. Economists, surveyed by Reuters, predict that preliminary data, set to be released on Friday, will reveal a 0.4% expansion of the Gross Domestic Product (GDP) in July-September compared to the previous year, primarily due to subdued external demand.
Challenges Faced
The city-state narrowly avoided a technical recession in the second quarter of 2023 with a 0.1% quarter-on-quarter growth and a 0.5% year-on-year expansion. Despite the government’s expectation of avoiding a recession, economic growth has remained sluggish. Manufacturing, one of Singapore’s key growth engines, experienced its 11th consecutive contraction, plunging by 12.1% in August compared to the previous year. This, coupled with easing services growth, poses a challenge for the central bank as it grapples with inflation that, although it has cooled from its peak, has not yet significantly eased.
Central Bank’s Response
The Monetary Authority of Singapore (MAS) is expected to maintain its current monetary policy settings in the upcoming review. The trade ministry recently revised its GDP growth forecast for 2023 to 0.5% to 1.5%, down from the previous range of 0.5% to 2.5%. Economists anticipate the central bank’s decision to keep the policy settings unchanged, considering the consecutive tight policy adjustments made earlier this year.
Leadership Transition
Ravi Menon, the outgoing central banker who has held the role since 2011, will retire on January 1, 2024. The current MAS policy review will be his last. Menon previously stated that MAS would not shift from its inflation-fighting mode to a growth-supporting mode.
Despite the challenges faced by Singapore’s economy, the central bank’s cautious approach and efforts to balance inflation containment and economic recovery are crucial. The upcoming data release will shed light on the current state of Singapore’s economic growth and provide insights into the future trajectory of the city-state’s recovery.
