Singapore, May 25 (BNA): Singapore’s economy expanded more than expected in the first quarter, but annual GDP is likely to be in the lower half of the government’s forecast range, officials said Wednesday, citing supply chain disruptions.
Southeast Asia’s financial hub is often seen as a driver of global growth as international trade dwarfs its domestic economy.
Gross domestic product grew 3.7 percent year-on-year in the first quarter, the Ministry of Trade and Industry said, above the government’s advance estimate of 3.4 percent, but matching analyst expectations in a Reuters poll.
“The external economic environment has unfortunately deteriorated … the strict measures implemented in China to contain the domestic COVID-19 outbreak are likely to affect its economy and contribute to global supply bottlenecks,” said Gabriel Lim, Permanent Secretary of Commerce and Industry.
He added, “As a result, global supply disruptions are expected to be more severe and prolonged than previously anticipated, and are likely to continue throughout 2022. This, in turn, is likely to constrain production and weaken GDP growth in some external economies by more than We expected earlier.”
On a seasonally adjusted quarterly basis, the economy expanded 0.7%.
The MTI kept its 2022 GDP growth forecast at 3% to 5%, but said growth is likely to come in the lower half of that range, due to the uncertainty stemming from China’s strict COVID-19 measures.
MUFG analyst Jeff Ng said: “Singapore made good progress in the first quarter, reopening the economy while all sectors appeared to be outperforming or returning to normal. Moving forward will be more difficult if China enters a recession as this will lead to downside risks to Singapore economy.
The city state has removed most of the COVID-19 restrictions and eased entry requirements for travelers.
Singapore also maintained inflation guidance which indicated that core inflation – the central bank’s preferred rate measure – could peak around 4% in the third quarter, before tapering off in late 2022.
Official data showed, today, Monday, that the core inflation rate in Singapore rose in April at the fastest pace in a decade, driven by higher inflation in food and utilities prices.
“The current stance of monetary policy remains appropriate,” Edward Robinson, deputy director general of the Monetary Authority of Singapore, said at a media briefing on Wednesday.
He added that “the cumulative effects of the three (past) tightening movements of monetary policy will slow the inflation momentum.”
Singapore Prime Minister Lee Hsien Loong said last week that global measures taken to tackle inflation may lead to a recession, but are necessary to prevent inflation from worsening.