As Singapore's recovery from the pandemic stabilizes and seeks to ease restrictions on the virus, the Ministry of Trade and Industry reiterated its forecast from November last year that it expects gross domestic product (GDP) to grow by 3% to 5% this year, raising the growth rate for 2021 from 7.2% to 7.6%.

Singapore's goal is to relax travel and home restrictions after the wave of COVID-19 infection has passed, which will boost the struggling tourism and retail industry, which may boost growth this year. This reopening progress contrasts sharply with its regional hub competitor Hong Kong.  

Selena Ling, the head of financial research and strategy at OCBC Bank in Singapore, said that Singapore's plan to further relax restrictions announced on Wednesday should be a good omen for this year. If border opening and security management measures are relaxed and accelerated, there is a potential upward risk of 3% -5% in the forecast.

The data was released one day before Singapore's highly anticipated budget report, which is expected to guide the government back to a conservative fiscal stance and moderate budget surplus, and may see the most aggressive tax increase measures in years. Officials stated at a press conference on Thursday that the current growth forecast does not take into account the possible increase in the Goods and Services Tax, which is expected to appear during the budget report release.

The Ministry of Trade and Industry said in a statement that in the context of the global economic recovery, the prospects of export-oriented industries such as manufacturing and trade will remain strong this year, while aviation and tourism related activities are expected to slow down due to the risk of repeated COVID-19 epidemics.

downside-risk

The Ministry of Trade and Industry also pointed out the downside risks brought by the slowdown in external demand, especially from the United States and Europe, citing concerns about supply chain bottlenecks, rising energy prices, and the possibility of financial instability due to tightening monetary policies in some countries.

On Thursday, Singapore raised its GDP data to last year's level, while lowering its expectation for economic contraction in 2020 from an earlier 5.4% to 4.1%.

Khoon Goh, Head of Asia Research at ANZ Bank Group in Singapore, said: 'The revised data suggests that the economic output gap may be much smaller and close to zero, implying greater inflationary pressure than previously expected.'. ”

The authorities are also facing the largest increase in the overall consumer price index (CPI) in 8 years, which forced the central bank to unexpectedly tighten monetary policy last month.