Singapore’s economy poised for further growth as global demand shifts to Asean: panellists

Singapore’s economy is poised for expansion as global demand shifts to Asean countries, largely due to supply chain disruptions, geopolitical conflicts and China’s zero-Covid policy, speakers at a panel discussion said on Wednesday (June 8).

Chua Hak Bin, the co-head of macro research at Maybank’s investment banking group, said the reopening of borders in South-east Asia in recent months have given an “incredible boost” to Singapore’s first-quarter growth, with the momentum likely to persist in the second quarter

Singapore’s gross domestic product grew 3.4 per cent in the first 3 months of 2022, and analysts are upbeat that growth will be stronger in the second quarter now that most Covid-19 restrictions and border control measures have been lifted.

“Despite the challenging external environment, Asean countries have recorded steady growth and some countries, including Singapore, are benefiting from global diversion orders due to China’s lockdown,” said Chua on the first day of Maybank’s Invest Asean conference.

He noted that even as China’s Purchasing Managers’ Index was in contraction in April and May, most of the Asean countries were not affected too much. In May, the Singapore Institute of Purchasing and Materials Management’s Purchasing Managers’ Index inched up by 0.1 point to 50.4 points, on the back of a faster expansion in new orders.

Although Singapore is located in a region sandwiched by the United States and China, Chua said that Singapore’s active involvement in global trade pacts such as the Regional Comprehensive Economic Partnership has helped the country to attract foreign investment.

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On the issue of rising inflation, Hoe Ee Khor, the chief economist of the Asean+3 Macroeconomic Research Office, told the audience that the inflation rate in Asean countries of between 4.5 per cent and 5 per cent is “beyond the market forecast”.

Singapore’s core inflation accelerated to 3.3 per cent year-on-year in April, the highest level since January 2012, driven by higher energy and food costs. Private sector economists and analysts expect the headline inflation to come in at 5 per cent this year, higher than the previous estimate of 3.6 per cent.

“The higher cost for food and commodities also might derail Asean countries’ economies’ growth. The growth should be stronger than last year due to a low-base effect, but could be lower than our initial forecast,” he said.

Khor noted that for countries that have shown strong signs of economic recovery, there is a need to tighten monetary policy and remove costly stimulus packages in order to curb inflationary pressures.