Singapore’s economy topped forecasts in 2022 but new risks growing

GDP grew 0.2% on a quarter-on-quarter seasonally adjusted basis in October-December.

Singapore Prime Minister Lee Hsien Loong said in his New Year message on Saturday that the international outlook remains troubled, which will affect the city-state’s economy. The government expects growth of between 0.5% to 2.5% this year.

Inflation

Singapore has seen some signs of price pressures easing in recent months but inflation still remained elevated at about 5%.

Meanwhile, the country’s sales tax has been raised to 8% from 7% since Jan. 1 this year as the government needs more revenue to fund increasing healthcare expenditure of its aging population. The sales tax will be further raised to 9% from 2024.

Singapore’s government has pledged to give almost 3 million Singaporeans at least S$700 in cash payouts over five years as part of an S$8 billion “assurance package” to help them cope with rising prices.

Capital Economics said the economy is likely to struggle, which means the Monetary Authority of Singapore is unlikely to tighten monetary policy in 2023. The central bank tightened its foreign exchange-based monetary policy four times last year to fight rampant inflationary pressures.

“Looking ahead, we think growth is likely to weaken further. Exports are likely to fall further if, as we expect, the global economy enters a recession in 2023,” Capital Economics said. “Elevated interest rates, declining household savings and high inflation are likely to drag on domestic demand.”