Alvin Tan, Minister of State for Trade and Industry, told Parliament on Monday (4 July) that Singapore does not expect its economy to enter a recession or stagflation in the coming year. However, he cautioned that "substantial" global headwinds persist.
In answer to inquiries from Members of Parliament (MPs) regarding the economic prospects, he noted that so far this year, local economic activity has remained "resilient" despite inflationary pressures.
The current growth prediction for Singapore's GDP in 2022 is at the lower end of the range between 3% and 5%. Mr. Tan stated that policymakers "expect growth to decline further next year" but "do not anticipate a recession or stagflation" at this time.
Stagflation, a mix of economic stagnation and inflation, is a condition in which an economy faces the dual problems of sluggish economic development and unemployment in the context of growing inflation.
Mr. Tan cautioned, however, that "substantial" dangers exist in the global economy, including further escalation of the Russia-Ukraine conflict, more severe global supply disruptions, faster-than-anticipated monetary policy tightening in leading countries, and the COVID-19 pandemic.
Some economists raise their inflation projections, stating that if prices continue to rise, more relief measures may be required.
He noted that Singapore, as a tiny and open economy, cannot be shielded from more adverse external trends.
Specifically, the country has suffered a large increase in inflation due to rising food and energy prices.
The headline inflation rate increased to 5.6% in May, up from 5.4% in April and reaching its highest level since November 2011, when headline inflation reached 5.7%.
Core inflation, which includes private transportation and housing prices, rose from 3.3% in April to 3.6% in May, marking the index's highest level since December 2008, when core inflation reached 4.2%.
Mr. Tan stated, "Inflation is anticipated to rise more in the coming months, but it should begin to decline by the end of the year if foreign inflationary pressures abate."
Official predictions for full-year inflation in 2022 continue at a range of 4.5 to 5.5% for headline inflation, and 2.5 to 3.5% for core inflation.
"Despite rising prices, economic activity in Singapore has been robust thus far," said Mr. Tan, highlighting the economy's 3.7% annual growth in the first quarter.
In April and May, non-oil domestic exports and industrial production remained "strong," rising 9.3% and 10% year-over-year, respectively.
Similarly, retail and food and beverage sales volumes climbed by 8.4% and 6.9% year-over-year in April, indicating that the recovery from the pandemic persisted.
Mr. Tan noted that the high inflation estimates of the last few months "had not resulted in significant reductions in consumer consumption."
In answer to a follow-up question from MP Desmond Choo, he stated: "In reality, expenditure on food services, as well as clothing and footwear, has increased significantly compared to (the first quarter of) 2022 in the month of April" (PAP-Tampines).
Mr. Tan stated that, for the remainder of the year, the rebound in international travel and domestic demand as a result of the removal of pandemic restrictions will assist to offset the weakening foreign demand.
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