The Ministry of Trade and Industry (MTI) lifted its forecast to 4.5%-5.5%, from its previous range of 2%-4%. It is the second upgrade this year, after the government initially forecast growth of 1%-3%.

The upgrade followed stronger-than-expected first-half performance. Singapore’s economy expanded 5.9% year on year in the second quarter, slightly ahead of the 5.7% advance estimate, taking the first-half growth to 6.1%.

Manufacturing was a major driver, expanding 12.5% in the second quarter, compared with 7.3% in the first. Growth was led by electronics and precision engineering as global demand for AI-related hardware remained strong.

Wholesale trade grew 8.3%, supported by higher sales of machinery and equipment, telecommunications products, computers, and electronic components. Finance and insurance expanded 6.2%, helped by stronger bank lending, fee income, and fund-management activity.

MTI said the global AI investment boom had been stronger than expected and was providing significant support to economies embedded in the global technology supply chain. Further increases in AI-related capital spending could provide additional momentum for Singapore during the rest of the year.

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This disturbing development comes at a time when there is a high demand from businesses and talent to relocate to the city.

Most visas given to foreign professionals, the Employment Permit and S Pass, saw an increase in holder numbers from 323,500 in 2021 to 365,200 in 2022. The region’s business communities are concerned about the rising costs of living and working spaces.

According to a European Chamber of Commerce in Singapore (EuroCham) survey, half of the expats who recently renewed their residential lease experienced rent increases of over 40%, and seven out of ten businesses are prepared to relocate workers if costs don’t decrease.

As per logistics service provider APAC Relocation, the rent increase has caused around 10% of its clientele to move away from Singapore.

Many expats also prefer to downsize from private landed homes and larger condominiums in Singapore’s city centre to smaller apartments and even public housing in the suburbs.

Why Is It Happening?

Singapore and New York have taken the top rank as the most expensive cities in the world to live in. The cost of living is continuing to rise because of the following reasons:

High Inflation

The cost of living has increased significantly in major cities worldwide, including Singapore, due to rising inflation, according to the Economist Intelligence Unit (EIU).

According to the poll, the average cost of products in the world’s largest cities increased by 8.1% this year in local currency. In 2021, the price increase was 3.5%, for comparison.

This rate is the highest in at least 20 years. According to EIU, gasoline costs have grown the fastest, but utility and food prices have risen significantly.

Singapore’s core inflation fell to 5% year-on-year in March 2023, the first time it has slowed since October 2022, but worries remain as the Monetary Authority of Singapore and the Ministry of Trade and Industry noted the overall high core inflation ratio, which would maintain a strong trajectory in days ahead.

“On the domestic front, unit labour costs are expected to increase further in the near term; and businesses could continue to pass through accumulated such costs to consumer prices albeit at a more moderate pace,” the departments predicted.

Car and accommodation cost increases are also likely to stay firm in the months ahead. For 2023, headline and core inflation are projected to average 5.5 to 6.5% and 3.5 to 4.5%, respectively.

The Singapore Dollar Is Robust

A stronger currency tends to boost a city’s rating as prices are greater when represented in international common currency. EIU transforms prices in local currencies into US dollars to determine each city’s index. Exchange rates vs. the dollar also influence the rankings. Due to its strong currency, Singapore typically ranks highly on the EIU’s index.

Ukraine War, COVID & Trade Disruptions

Food and home products inflation has been high amid trade restrictions brought on in part by the conflict in Ukraine. In addition, the EIU observed that gasoline prices had increased at the fastest rates.

Because of rising international oil costs and a stronger US dollar, the average price of a litre of gasoline has increased by 22% on an annual basis in local currency.

Due to its open economy, Singapore is not immune to problems with international trade. For instance, in 2022 June, fuel pump prices crossed the S$4.00 mark for the first time due to discussions about a ban on Russian oil and increasing post-pandemic demand from economies.

In the 172 cities surveyed, utility costs for electricity and gas increased by an average of 11% in local currency due to the high cost of energy commodities.

Exorbitant Discretionary Purchases

Due to severe government restrictions on the number of cars, Singapore has the highest transportation costs in the world, claims EIU. Clothing, alcohol, and tobacco are also among the most expensive commodities in this city.

A Singaporean who desires a more upscale way of life must spend money on such things.

A DBS survey indicated that Singapore’s discretionary expenditure had increased over 2022. More individuals spent money on entertainment, travel, food, and alcohol, which could have raised prices due to increased demand.

The State’s Reaction

According to Albert Tsui, executive director of advocacy and policy at the Singapore Corporate Federation, supply chain interruptions, inflation, and rising rents have all increased corporate costs.

However, Tsui told Aljazeera that while growing expenses would reduce Singapore’s allure, businesses know that many factors are considered when choosing where to invest.

Tsui remarked that easy access to international talent, solid infrastructure, and institutions that can preserve the value of corporate assets continue to set Singapore apart.

Singapore’s stable political and pro-business environment also encourages business sustainability, making it still a desirable location.

The government has emphasized actively watching the property market, including the residential rental sector, in response to worries that rising rents may make Singapore less attractive to foreign talent.

In response to parliamentary inquiries in November 2022, National Development Minister Desmond Lee stated that “global talents consider many factors besides rental prices when making relocation decisions.”

These include Singapore’s status as a centre for international commerce, its robust external connectivity, solid trade ties, and high standards for healthcare and education. However, the circumstances have made it challenging for many foreigners to remain.

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The farm also sells up to 400kg of vegetables per day to neighboring merchants, according to her, making it no little operation.

She claims that despite Singapore’s tiny size, there are many parking lots here. Having farms [here] to provide for the needs of the community’s citizens is essentially the dream.

These rooftop farms have now appeared all across the South East Asian city-state, numbering at least a dozen.

In 2020, the government began leasing the odd plots as part of its goal to boost domestic food production. Currently, the 5.5 million-person nation imports more than 90% of its food.

But because there is little room in this highly populated island nation, the land is expensive. The most expensive real estate in the world is found in Singapore.

One farmer told the BBC that he had to give up his initial parking lot plot due to the high price and relocate to a less expensive area.

The operations were in full swing when BBC News visited Goh’s farm, which is approximately the size of a football pitch.

Choy sum, a leafy green vegetable used in Chinese cookery, was being picked, prepared, and packaged by workers.

Another worker was repotting seedlings at the opposite end of the building.

Goh states that every day we are harvesting. The amount each day might vary depending on the vegetables we are cultivating, from 100kg to 200kg to 400kg.

She estimates that launching the farm cost about USD 1 million, with a large portion of the funds going toward equipment to facilitate faster harvesting.

Despite certain subsidies, Goh claims her company is still not viable.

She has 10 staff and pays rent for the location as well as another car park plot, which is still being developed, for about USD 90,000.

Since we were establishing up during the COVID pandemic, Goh continues, logistics were far more difficult and expensive.

The process was also brand-new to everyone because this was the government’s first rooftop parking tender, she continues.

Singapore’s rooftop farmers are also developing alternative sources of income.

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The Southeast Asian economy’s growth in the second quarter compared to the same period last year has been enormous, according to the estimates reported by the Ministry of Trade and Industry. That performance has slightly exceeded the year-on-year jump as forecasted by market analysts.

The ministry released a statement, saying, “The strong growth was largely due to the low base in the second quarter of 2020 when GDP fell by 13.3 percent due to the Circuit Breaker (CB) measures implemented from 7 April to 1 June 2020.”

Due to the partial lockdown implemented in Singapore, large parts of the economy shut down to slow the spread of Coronavirus.

But compared to the previous quarter, the economy contracted by 2 percent, but the gross domestic product (GDP) in the April to June period this year remained 0.9 percent below the second quarter of 2019.

During the second quarter of 2021, goods-producing industries expanded by 22.2 percent from a year ago, but contracted 2.5 percent compared to the first quarter. Additionally, the services industry grew by 9.8 percent, and the key manufacturing sector grew by 18.5 percent compared to the same period last year.

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Alvin Tan, minister of trade and State for trade and industry said that this agreement will let businesses from both countries have access to market opportunities and it will also help foster greater cooperation in sectors such as e-commerce, customs, trade facilitation, and maritime services.

In a webinar hosted by the Lee Kuan Yew School of Public Policy, Tan told the media, “I am pleased to share that our chief negotiators are preparing the agreement for signature by the end of this year. This FTA will send a powerful message to the global community that our countries remain open for business and that despite pressures placed on economic multilateralism, we want to reach out to one another and create opportunities for our people.”

Back in 2019, Singapore’s total trade in goods with the PA stood at $6.1 billion and it accounted for 33.2 percent of the country’s total merchandise trade with Latin America. In 2018, trades in services amounted to $2.6 billion and brought in 28.2 percent of Singapore’s total trade services in the region.

The latest FTA will make Singapore the first associate state of the alliance. The PA was formed back in 2012 and Singapore became an Observer State to the PA in 2014 and a Candidate Associate State in 2017.

Apart from the latest trade deal, Singapore already has existing agreements with three of the four PA countries – Chile, Mexico, and Peru, and they are also members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

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These funds will also help manage new equity and fixed income, which will be focused on climate change and the environment. The announcement was made by managing director Ravi Menon while launching the central bank’s first sustainability report.

Menon said in a statement, “The GIP will help to enhance the climate resilience of the official foreign reserves, attract sustainability-focused asset managers to Singapore and catalyse funding towards environmentally sustainable projects in Asia and beyond.”

The five appointed asset managers will establish their regional sustainability hubs in the country itself and will also launch new thematic funds focused on environmental, social, and corporate governance (ESG). They will also focus on building green finance with the help of in-house and external training programmes in order to generate in-depth research on ESG and green financial technology effort.

MAS will also consult with the industry sometime later this year in order to discuss the compulsory climate-related disclosures by the financial bodies while focusing on transitioning these expectations into legally binding requirements, according to the global standards.

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The forecast, which was carried out by 24 economists and analysts, pegged growth at between 5 percent and 6.9 percent. The outlook also improved for the labour market, penciling in a lower overall unemployment rate at 2.9 percent by the year-end.

Singapore’s Ministry of Trade and Industry in its forecast said that Singapore’s economy will grow by 4 percent to 6 percent this year, making a gradual recovery from the recession caused by the coronavirus pandemic.

In a statement, the ministry said, “Although the speed of vaccine deployment varies, advanced economies like the US and Eurozone are likely to reach population immunity by the second half of this year, which should, in turn, spur their economic recoveries.”

The ministry further revealed that Singapore’s economy contracted by 5.4 percent in 2020, making it the worst recession since its independence in 1965. Singapore’s gross domestic product (GDP) was forecasted to contract between 5 to 7 percent, according to the Singapore Exchange Limited (SGX). The forecast was most likely based on the ill-performing travel, construction and retail sector in the city-state.

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slower than the previous recessions, according to the Monetary Authority of Singapore

(MAS).

Singapore’s economy contracted by around 7 percent during the third quarter. The

economy however contracted by 13.2 percent in the second quarter. The reduction in

the contraction rate is based on the resumption of economic activities as the city-state

relaxed lockdown measures introduced earlier to stop the spread of the coronavirus.

“Some pockets of the economy, particularly the travel-related and some contact-

intensive domestic services, are not expected to recover to pre-pandemic levels even by

the end of next year,” the central bank said in its report.

MAS reiterated the government’s forecast for the economy to shrink by a record 5

percent to 7 percent this year because of the coronavirus pandemic. According to MAS,

the economy will post above-trend growth for 2021 due to the effects of the low base in

2020.

“The nature of the Covid-19 shock has rendered this crisis to be deeper and likely more

prolonged than past recessions. Furthermore, the lack of wide-scale vaccination in

Singapore and abroad raises threats of repeated outbreaks that will continue to

generate economic uncertainty, hampering a more decisive recovery,” the central bank

added.

According to the Singapore Exchange Limited (SGX), the city-state’s gross domestic

product is forecasted to contract between 5 percent to 7 percent. The forecast is most

likely based on the ill-performing travel, construction, and retail sector in the city-state.

Construction activities in Singapore decreased by 44.7 percent in the third quarter of

2020 compared to the same period in 2019. The drop is attributed to sluggish

resumption of activities due to safe management measures.

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Construction activities in Singapore decreased by 44.7 percent in the third quarter of 2020 when compared to the same period in 2019. The drop is mainly due to sluggish resumption of activities due to safe management measures.

The retail sector in Singapore also underperformed. It recorded a drop in retail sales in August by 6 percent. F&B Services Index went down 3 percent in August from July figures but recovered 29 percent in July when compared to June.

The SGX report further revealed that when it comes to employment, most jobs are created in the information and communications, food services, professional services, healthcare, finance and the insurance sector.

The Monetary Authority of Singapore(MAS) last month through a survey forecasted that Singapore’s GDP will contract by 6 percent in 2020. In an earlier survey carried out in the month of June, MAS forecasted Singapore’s GDP to contract by 5.8 percent this year.

The Singapore Business Review reported that based on the survey’s mean probability distribution, the most likely outcome is for the economy to shrink by 5.1 to 7.1 percent in 2020. This accelerated from the earlier estimates of -6 percent to -4.1 percent.

The survey further reveals that the GDP will grow next year despite a contraction this year due to the coronavirus pandemic.

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It is also 8 percentage points higher than the 11.8 percent contraction expected by the Monetary Authority of Singapore (MAS).

On a quarterly basis, the economy shrank by 41.2 percent.

This could possibly mark the start of a recession for Singapore.

On the positive side, the manufacturing sector grew by 2.5 percent year-on-year in the second quarter. However, the growth rate is much smaller when we compare it to the 8.2 percent growth the sector achieved during the previous quarter.

Furthermore, the construction sector contracted by 54.7 percent year-on-year in the second quarter, a significant deterioration from the 1.1 percent dip in the first quarter.

Last week, a report by United Overseas Bank (UOB) forecasted that Singapore’s gross domestic product in the second quarter of 2020 may contract by 34.6 percent if we compare it to the first quarter.

Barnabas Gan, an economist at UOB said, “We note that the uncertainty surrounding the length and severity of COVID-19, as well as the emergence of renewed US-China tensions continue to cloud Singapore’s trade prospects. Collectively, the quick deterioration of economic prospects both globally and domestically is expected to weaken Singapore’s labour market.”

According to the ministry of labour, the unemployment rate in Singapore also increased to 2.4 percent in the first quarter.

According to economists and analysts polled in a survey by the Monetary Authority of Singapore (MAS) last month, its economy is expected to contract by 5.8 percent this year.

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