Singapore’s non-oil domestic exports rose 9% last month, according to official data from Enterprise Singapore released on Monday.
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According to Brian Tan, senior regional economist at Barclays, Singapore’s economy is “definitely running above its capacity” as it faces labor shortages from the pandemic and strong manufacturing activity.
While a strengthening Singapore dollar is likely to weigh on export momentum, Tan said it could be “okay” that the country needs to ease some of the inflationary pressures that stem from strong demand across the board, including in exports and manufacturing. are increasing.
“The Singapore dollar is structured to slow exports as the Singapore dollar appreciates relative to the policy band, and this will naturally slow the rest of the economy,” Tan said.
After Monetary Authority of Singapore Last Thursday’s announcement It will take a “forward calibrated step” to tighten monetary policy to fight inflation, The Singapore currency rose nearly 0.7% to S$1.3963 per dollarEconomists expect more tightening in October.
Tan said that although a strong manufacturing sector is desired, “very strong activity” is contributing to the country’s inflationary pressures as a tight labor market is pushing up wages.
The country has fully reopened its borders and foreign workers are arriving, but they are being “absorbed more quickly than they are being filled,” many of them in the travel and service sectors. hired in.
Similarly, a pandemic-induced labor shortage in the country’s manufacturing sector means there are not enough workers to meet demand, Tan said, adding that it is also trying to find and hire workers, “So there’s very strong competition right now.”
His comments came after Singapore’s non-oil domestic exports (NODX) expanded for the 19th month in a row, rising 9% year over year last month, though it was down from 12% in May, According to official figures from Enterprise Singapore Released on Monday.
The largest contributors to the growth in NODX were from Malaysia, Indonesia and the United States. According to the government agency, electronic shipments grew by 4.1 per cent in June, a sharp decline from the 12.9 per cent growth in May, while non-electronic NODX grew 10.6% in June, from an 11.7 per cent increase in the previous month.
Tan said strong manufacturing and exports would be good for the economy, but Singapore doesn’t have enough workers to meet growing demand. “It may be wise to slow down [manufacturing and export activity] Unless there is a supply recovery to bring inflationary pressures under control,” Tan said.
He added that inflation in Singapore would be a “key to watch” in the second half of the year.
Even if some of the labor shortage has been overcome by the reopening of travel borders, Tan said the recovery will be gradual.
Inflation will likely remain “quite stable” in the second half, and may only begin to cool by the end of the year, he said.