Global economy to expand by 4.9 pct next year - MoF

In 2022, gross domestic product (GDP) in the advanced economies is forecast to moderate to 4.5 per cent but remain robust, led by the normalisation of economic activities, the Ministry of Finance (MoF) said in its Economic Outlook 2022 report released today.

"Growth in the United States (US) is expected to be at 5.2 per cent due to reduced fiscal support and a slow recovery in the services sector. GDP in the Euro area is anticipated to be at 4.3 per cent, as the demand for consumer goods continues to increase.

"Singapore's GDP is expected to grow by 3.2 per cent, driven by a strong rebound in the manufacturing sector.

"South Korea's GDP is expected to moderate to 3.3 per cent following a contraction in domestic demand, while Japan's GDP is projected to improve by 3.2 per cent, following higher economic activities as the economy fully reopens," it said.

According to the report, growth in the EMDEs is projected to moderate to 5.1 per cent in 2022, owing to the gradual unwinding of fiscal support and subdued investment.

It said growth in China is expected to be slower at 5.6 per cent compared to 2021, reflecting reducing fiscal and monetary support as well as tighter property and macroprudential regulations, while India is estimated to record high growth of 8.5 per cent, supported by government expenditure and investment in public infrastructure.

"The GDP of ASEAN-5 (Indonesia, Malaysia, the Philippines, Singapore and Thailand) is anticipated to record 5.8 per cent, supported by expected improvements in trade.

"Indonesia's economy is forecast to expand by 5.9 per cent with growth in the construction industry, supported by major infrastructure projects such as the revitalisation of airports, toll roads, mass rapid transit as well as the construction of new ports and upgrading of existing ports," it said.

On the other hand, world trade is expected to record 6.7 per cent in 2022 as compared to 9.7 per cent projected this year, as a slower recovery is projected in the services trade, particularly in tourism activities following continuous cross-border travel restrictions.

For this year, the report stated that the global economy is projected to expand by 5.9 per cent, underpinned by widespread vaccine rollouts, accommodative policy support, and rising commodity prices.

Nevertheless, MoF said higher infection rates and new variants of the COVID-19 virus are expected to be the headwinds to economic improvement.

"The GDP in advanced economies is expected to grow by 5.2 per cent in 2021, driven by the easing of pandemic restrictions, speedy vaccine rollouts and large-scale fiscal support.

"The US economy is estimated to expand by 6.0 per cent. The economic recovery packages amounting approximately to US$4 trillion that was passed by the Senate are expected to strengthen the social safety net, deliver a strong boost to growth and provide sizable positive spillovers to its trading partners," it said.

The GDP in the euro area is also expected to rise by 5.0 per cent with firming external demand, while growth in Singapore is projected to turn around by 6.0 per cent, backed by progressive relaxation of domestic and border restrictions as its vaccination rates continue to rise.

"South Korea's economy is expected to turn around by 4.3 per cent, driven by strong exports and public investments. Similarly, GDP in Japan is estimated to rebound by 2.4 per cent, reflecting a recovery in domestic economic activities alongside a robust external demand," it said.

According to the report, growth in the EMDEs is projected to turn around by 6.4 per cent in 2021, supported by elevated commodity prices and improved external demand.

"China is expected to lead the recovery in the region with strong growth of 8.0 per cent in 2021, bolstered by higher private consumption and exports. The economy of India is estimated to rebound by 9.5 per cent on the back of strong consumer demand.

"The GDP of ASEAN-5 is anticipated to turn around by 2.9 per cent (this year) on account of robust domestic consumption, higher investment and a favourable trade environment. Indonesia's economy is projected to recover by 3.2 per cent, driven by export-oriented and labour-intensive industries such as automotive, construction and mining," it added.

In 2021, world trade is expected to accelerate by 9.7 per cent, largely contributed by the increase in merchandise volumes which have returned to pre-pandemic levels.

Trade in the advanced economies is estimated to rebound by 8.5 per cent in 2021, where fiscal stimulus measures in these countries will boost household incomes and spending on ail goods, including imported goods.