Singapore’s gross domestic product (GDP) is tipped to expand by 3.6% y-o-y in 2022, according to market watchers in the Monetary Authority of Singapore’s (MAS) December survey of professional forecasters.
The estimate is slightly higher than the previous estimate of 3.5% in September. Some 21 economists and analysts responded to the survey, which was sent out on Nov 23.
Looking ahead, respondents expect Singapore’s economy to grow by 2.1% in the 4Q2022. The city-state’s economy expanded by 4.1% in the 3Q2022, exceeding the respondents’ median forecast of 3.9% in the September survey.
Based on the current survey, the Singapore economy is most likely to grow by 3.0% to 3.9% in 2022, similar to the previous survey. The average probability assigned to the range is 73.1%, up from 52.8% previously.
Inflation figures in 2022
Further to the survey, the respondents polled indicate that Singapore’s CPI-All Items inflation and MAS Core Inflation in the 4Q2022 are expected to come in at 6.4% and 5.0% respectively.
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According to the current survey, the median forecast for CPI-All Items inflation for 2022 is 6.1%, up from 5.7% in the September survey. At the same time, the median forecast for MAS Core Inflation increased to 4.1% from 3.8% in the previous survey.
Both estimates still stand within MAS’s range of 5.5% to 6.5% for CPI-All Items inflation and 3.55 to 4.5% for MAS Core Inflation.
The respondents also project that CPI-All Items inflation is most likely to come in between 6.0% and 6.4% for 2022, higher than the 5.5% to 5.9% range in the September survey. In December, respondents also expect MAS Core Inflation to come in between 4.0% and 4.4%, compared to 3.5% and 3.9% previously.
The respondents expect the unemployment rate for Singapore’s labour market to reach 2.1% by the end of the year.
GDP expected to expand by 1.8% in 2023
Singapore’s GDP is projected to expand by 1.8% in 2023, down from the previous estimate of 2.8% in the September survey. The respondents polled also assigned the highest probability to the 1.0% to 1.9% range, compared to the 2.0% to 2.9% range in the previous survey.
In 2023, CPI-All Items inflation is forecast to expand by 5.2% while MAS Core Inflation is expected to come in at 4.0%.
In the current survey, respondents assigned the highest probability to the 5.5% to 5.9% range for CPI-All Items inflation and 4.0% to 4.4% range for MAS Core Inflation. Both forecasts incorporate the effects of the GST increase, which will be implemented on Jan 1, 2023.
Corporate profitability expected to improve for 50% of respondents in 2022
For the whole of 2022, 50% of market watchers who responded, expect corporate profitability to improve while a third expect it to decline.
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At the same time, 66.7% of respondents anticipate corporate bond spreads to widen while a third expect bond spreads to narrow for 2022.
Similarly, 66.7% of respondents expect private residential property prices to increase while 16.7% expect property prices to either remain stable or decline.
In the 4Q2022, 50% of the respondents polled expect corporate profits to remain stable y-o-y, while a third anticipate higher profits. The remainder are expecting corporate profits to see a decline y-o-y during the quarter.
Meanwhile, an equal number of respondents expect private residential property prices to increase, remain stable, or decline in the 4Q2022.
Around 50% of the respondents polled also expect the SGD corporate bond spreads to remain stable in the 4Q2022, while a third expect spreads to widen. The remainder expect spreads to narrow.
For 2023, most of the respondents have projected lower corporate profitability and private residential property prices, as well as wider corporate bond spreads.
Less aggressive rate hikes seen as ‘upside driver’ of domestic financial market and lending conditions
In the current survey, respondents cited the tighter global financial conditions, further stresses in China, as well as an escalation in geopolitical tensions as the main factors that could potentially weigh on the financial market and lending conditions in Singapore.
At the same time, most respondents identified the less aggressive rate hikes by central banks as an “upside driver” of domestic financial market and lending conditions.
Capital inflows into Singapore and China were also flagged as potential upside drivers.
On the Singapore economy, most respondents (62.5%) cited spillovers from a slowdown in the global economy as a risk to the domestic growth outlook. The spillovers were also ranked as the top downside risk by 31.3% of respondents.
In addition, respondents also indicated their concerns about downside risks from factors such as an escalation in geopolitical tensions and spillovers from the Covid-19 lockdowns and social unrest in China.
On the other hand, more robust growth in China was the most frequently cited upside risk to Singapore’s growth outlook, with 87.5% of respondents agreeing. Other upside risks cited were better-than-expected economic growth and a slower pace of global interest rate hikes.
A third of respondents expect MAS to increase its slope in the S$NEER policy band next April
While most respondents do not expect the MAS to adjust its monetary policy stance in April and October 2023, the remaining 33% of respondents expect to see an increase in the slope of the S$NEER (or Singapore dollar nominal effective exchange rate) policy band in April 2023.
Another 11% of respondents expect the MAS to increase its slope in its S$NEER policy band in October 2023.
Additionally, 11% of respondents expect MAS to raise the level at which the S$NEER policy band is centred in the April review. Another 5.6% expect a downward recentring in the October review.
None of the respondents expect to see adjustments in the width of the policy band in 2023.
