Singapore must continue to make friends, manage inflation and commit to climate goals

SINGAPORE must continue to make friends with the rest of the world, manage inflation decisively and commit to its climate goals, said Monetary Authority of Singapore (MAS) board member Alvin Tan on Wednesday (June 8).

He made these points on the first day of Maybank’s Invest Asean conference, noting that the Republic is “not immune” to the effects of the ongoing war in Ukraine, the Covid-19 pandemic and rising prices.

“These will filter through to Singapore’s imported costs over the rest of this year and possibly into next year,” said Tan, who is also Minister of State for Trade and Industry. “There may also be embers from the pandemic that may flare again. The coming winter months and waning vaccine protection could spring some surprises,” he warned.

The near-term outlook for Singapore has become “more uncertain” due to external headwinds, and Tan said the expectation is that growth for external-facing sectors like manufacturing will slow this year amid some pullback in external demand, as well as in business and financial market sentiment.

This, however, should be offset by the easing of domestic and border restrictions since the end of March. He reiterated the government’s official projection that Singapore’s GDP growth will likely come in at the lower half of the 3-5 per cent forecast range for 2022.

In his address, Tan said that Singapore needs to diversify and invest in other parts of the world. He noted that Singapore is always looking to explore new agreements, be it digital economy agreements with the likes of Australia and the UK, or being part of multilateral trade agreements like the Regional Comprehensive Economic Partnership (RCEP).

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“In Asean, the RCEP represents an important milestone for us. It sends a strong signal to the world that Asean remains committed to free and open trade as we move towards becoming the world’s fourth-largest economy by 2030,” said Tan.

Turning to inflation, Tan noted that the MAS has been pre-emptive in tightening monetary policy, having embarked on the process since October 2021.

The cumulative effects of 3 rounds of tightening will help to slow inflation momentum. Targeted fiscal support will also help more vulnerable households cope with higher costs of living and help businesses continue to push ahead with upgrading and restructuring for the future,” he said.

“Global inflation is projected to remain high in 2022, with high global commodity prices pushing headline inflation rates. Futures markets suggest prices at above their 2021 averages throughout 2022,” he added.

Tan said that inflation “should moderate” this year, and major central banks have expressed a “strong willingness” to do what it takes to restore price stability.

“Monetary policy tightening should keep expectations anchored, and arrest inflationary momentum directly, assisted by progressive unblocking of supply chains,” he said.

As far as Singapore’s long-term climate change plans and stepping up its 2030 goals are concerned, Tan shared that this year’s Budget made it known that it will be a priority for the country moving forward. MAS, too, is playing a role in developing global and regional taxonomies and green standards, as well as building Singapore as a green finance hub, he said.