Singapore PM: Brace for more challenges

Back to normal: Visitors take selfies at Jewel Changi Airport. Singapore has charged ahead with its post-Covid reopening, leading the region in removing travel curbs and largely returning day-to-day life to pre-pandemic routines. — Bloomberg

SINGAPORE: Singapore must prepare for more economic challenges as inflation will remain high and central banks are tightening policies, Prime Minister Lee Hsien Loong (pic) said, warning that the world may face a recession within the next two years.

Russia’s war on Ukraine has clouded the outlook for Singapore’s post-Covid recovery on which the nation was “cautiously optimistic” at the start of this year, the premier said in a May Day address.

“Singaporeans are already feeling the impact of the war on the cost of living” with the island facing a S$8bil (US$5.8bil or RM25.2bil) hit a year from higher energy prices, he said.

Lee joins a growing list of global policymakers, market participants, economists and companies warning of recession risks against the backdrop of Russia’s invasion of Ukraine and Covid-19 shutdowns in China.

Singapore’s central bank said last week it expects global growth to moderate to 3.9% in 2022 from 5.4% last year as inflation reaches its fastest in 14 years.

“Inflation was already a problem before Ukraine, but the war has made it worse,” Lee said. The war has caused a worldwide energy crunch and disrupted food supplies, he added.

In addition to global pressures led by the Ukraine conflict, commodity shortages, and lockdowns in China, Singapore is seeing more domestic-focused triggers that have propelled inflation measures to decade highs.

The city-state has charged ahead with post-Covid reopening, leading the region in removing travel curbs and largely returning day-to-day life to pre-pandemic routines.

In a further sign it plans to treat the virus as endemic, the government last month scrapped all tests for incoming vaccinated visitors and limits on gatherings.

The broad re-opening of the city-state bodes well for a surge in demand, while a worker shortage and supply-chain blockages continue to put a strain on supply.

Singapore estimates core inflation to be between 2.5% and 3.5% this year, while headline inflation could be within a 4.5% and 5.5% range.

Prospects for further bubbling in price growth already has some analysts projecting an unscheduled tightening by the Monetary Authority of Singapore before their October meeting. — Bloomberg