Singapore Economy to Pick Up Pace

Singapore’s economy is on track to pick up pace into next year as the improved global outlook along with rising public spending spill over into private consumption, the International Monetary Fund said. But its small, open economy is also facing mounting global geopolitical risks and rising uncertainty.

In a regular statement outlining its forecast for the Singapore economy, the IMF noted that Singapore’s economic growth momentum has improved since late last year, supported by a recovery in the global electronics trade, CNA reported.

“However, the recovery has not yet been broad-based and private domestic demand, particularly private investment, remains subdued,” the IMF added, noting that the labor market also remains soft.

In addition, the economy continues to grapple with an ageing population, tightening of foreign worker inflow and slow productivity growth.

Still, growth and inflation will likely recover gradually in the coming months as stronger global demand and ongoing restructuring take effect, said the IMF. It expects the economy to expand 2.3% this year and 2.5% next year, up from 2% last year.

There are risks to this growth outlook. “Notwithstanding the recent trade recovery, economic and geopolitical risks have risen and could affect Singapore’s highly open economy,” said the IMF.

The main external risks stem from the impact of more inward-looking policies in the United States and a slowdown in major emerging economies. Tightening in global financial conditions, including faster-than-expected US interest rate hikes, could hit households and companies with high debt levels.

On the domestic front, uncertainty surrounding ongoing restructuring could hold back investment and productivity, and undermine improvements in income inequality. In line with these restructuring efforts, “Singapore has embraced a new growth model for a world of rapidly advancing digital technologies and automation”, noted the IMF.