28 Oct 2022 05:30 | Modified Date / Time: 28 Oct 2022 19:45
With economic growth slowing and inflation continuing to rise, Singapore faces a tough year ahead. One reason for this is that wages are expected to continue to rise.
Global inflation may come down from recent highs. But Singapore’s inflation will be higher than its historical average next year, the Monetary Authority of Singapore said in an economic report released yesterday.
Meanwhile, economic growth will slow further in 2023 as demand for Singapore’s core electronics exports declines at home and abroad.
Although Singapore’s economy does not face an immediate risk of recession, a recession could occur if economies such as the United States and the European Union see a long-term decline.
In a worst-case scenario, according to the Fed, the U.S. could avoid a full-year recession for now.
In that case, Singapore’s GDP growth in 2022 is likely to be between 3 percent and 4 percent. Analysts expect this to decline to 3 percent in the next year.
Meanwhile, declining overseas demand has brought the global electronics industry to the brink of collapse.
ஏற்றுமதியால் உந்தப்படும் சிங்கப்பூரின் உற்பத்தித் துறையின் பெரும்பகுதி மின்னணுவியல் துறையாக உள்ளது.
Consumer demand for electronics has slowed in China and the US, Singapore’s top two end-use markets.
This has affected Singapore’s electronics exports in recent months, the commission said.
Meanwhile, it noted that the domestic semiconductor industry is also being hit by rising energy costs.
The electronic Purchasing Managers’ Index contracted for the second month in a row as new orders and shipments fell further in September.
The growth prospects of the financial sector have also been affected due to tight financial conditions caused by rising global inflation and interest rate hikes by major central banks, the commission said.
A slowing economy will hurt employment growth. However, as inflation continues to rise, resident wage increases are expected to be higher than pre-Covid-19 rates.
This will increase business costs, possibly driving up inflation.
Resident wages are likely to rise this year and next year due to gradual salary hike expansions, salary hikes announced to retain employees in the public service sector, health, education sectors, etc.
However, moderate global growth and tight financial conditions may affect employee demand. The report noted that the impact could be on modern services, which mainly include outsourcing of manufacturing and specialization, financial services, and telecommunications.
The central bank did not change its latest inflation forecast on inflation.
Excluding accommodation and private transport costs, core inflation will average around 4 per cent this year and headline inflation around 6 per cent.
For the whole of 2023, taking into account all factors, including the goods and services tax (GST) hike that will take effect in January, headline inflation is projected to average between 3.5 percent and 4.5 percent.
Core inflation next year is forecast to average 5.5% to 6.5%.
Excluding the effects of GST hike, core inflation is likely to be 2.5% to 3.5%. Headline inflation is projected to be in the range of 4.5 to 5.5 percent.
Also, it has been said that the main reason for the inflation prevailing between June 2021 and June 2022 is the high price of fuel and agricultural commodities.