All eyes on Singapore’s reopening progress, VTL expansion for 2022 economic outlook

The Ministry of Trade and Industry’s growth forecast of 3 percent to 5 percent was reiterated by Prime Minister Lee Hsien Loong last week. The Straits Times FILE PHOTO

SINGAPORE — While the pace of relaxation of mobility curbs may have slowed in recent months, Singapore is still on track in its strategy to treat Covid-19 as endemic, analysts said.

Easing of domestic safety measures and broadening of vaccinated travel lanes (VTLs) without overwhelming the healthcare system will be key to achieve the 3 percent to 5 percent growth for 2022 forecast in November by the Ministry of Trade and Industry (MTI) and reiterated by Prime Minister Lee Hsien Loong last Friday (Dec 31).

Progress on the reopening strategy is needed to reinvigorate the services sector and construction in a year when manufacturing growth could moderate.

Mr Irvin Seah, senior economist at DBS Bank, said that besides capacity constraints and the high base set in 2021, the growth slowdown in China – Singapore’s largest trading partner – could potentially weigh on the performance of the manufacturing sector going forward.

Other risks that could derail hopes for a smoother growth trajectory include more-than-warranted hikes in interest rates worldwide in response to rising inflation, and new waves of infection brought about by Covid-19 mutations.

On the flip side, higher vaccination rates and an easing in severity of new Covid variants could imply a faster reopening of borders and aid economies across Asia.

In his New Year message, PM Lee said the country can be “quietly confident” that it can cope with the impact of the Omicron variant even though it is not completely out of the woods yet.

Singapore’s position now is “greatly strengthened” compared with two years ago amid a ramped-up vaccination drive that now includes young children, he said.

Singapore has one of the world’s highest vaccination rates, with 87 percent of its total population fully inoculated and booster shots administered to about 40 percent.

After suffering daily cases in the thousands a few months back amid the Delta variant wave, daily infections have dropped to the hundreds in the past week. Hospitalization rate and intensive care admissions have also dipped.

Dr Chua Hak Bin, regional co-head of macro research at Maybank Kim Eng in Singapore, said: “We expect the economic reopening to continue in the first quarter of 2022 as hospitalisations decline and more people receive booster shots.”

UOB Group economist Barnabas Gan said the recovery of Singapore’s aviation and tourism-related sectors is expected to continue, although MTI had said previously that activity is expected to remain below pre-Covid levels throughout 2022.

“Last but not least, the gradual relaxation of Singapore’s domestic restrictions should translate into a sustainable supply of manpower and support labour-intensive industries such as the construction sector,” he noted.