S’pore: MAS tightens policy as economy registers slow growth in Q2

The economy of Singapore reportedly grew slower than what was forecasted for the second quarter of this year, signaling towards a weak domestic and global demand for services and goods in the face of rising inflation.

According to flash estimates by the Ministry of Trade and Industry (MTI), Singapore’s GDP recorded a 4.8% year-on-year growth between April and June, with the manufacturing sector leading the charge. Although higher than the revised 4% in the first quarter, it is lower than the forecasted 5.4%.

When compared with Q1, the economy registered zero growth on a seasonally adjusted basis, signifying a severe loss in growth momentum.

Meanwhile, the Monetary Authority of Singapore (MAS) tightened its Singdollar policy again, for the second time this year, to allow the Singapore dollar to become stronger and cushion the impact of rising global prices after it flagged inflation forecasts for this year.

Analysts believe that this move, coupled with the dissatisfying growth data, is reflective of a shift in policy emphasis from boosting growth to curbing rising inflation.

MAS has also warned that Singapore’s GDP growth may be restrained until 2023, subsequent to the weak global economic atmosphere.

Selena Ling, Chief Economist, OCBC, stated that the country’s ‘flatlining’ quarterly growth marks the slowest growth registered since the first quarter (Q1) of 2020, when the Covid-19 pandemic had just begun.

In April, MTI maintained a 3-5% growth forecast for 2022 but cautioned that the expansion pace will likely happen at the lower side of the range following Russia’s war on Ukraine and lockdown in China, which disrupted supply chains and boosted inflation globally, respectively.

Core inflation is now predicted to come at 3-4% this year, up from the previous forecast of 2.5-3.5%.

Among the sectors registering growth, manufacturing grew 8% year-on-year, which was at 7.9% in the previous quarter, followed by construction with a 3.8% growth, compared to 1.8% in the previous quarter.

But on a quarter-on-quarter seasonally adjusted basis the sectors’ growth was weak.

Other sectors, like real estate, food and accommodation services, and administrative and support services, grew 8.2% year-on-year, up from 3.5% in previous quarter, driven by the ease in domestic and border restrictions.

Source credit: https://www.straitstimes.com/business/economy/singapore-economy-grew-48-in-second-quarter-flash-estimates

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