Why the 2022 GDP growth forecast was narrowed to 3.0%-4.0%

The previous forecast was 3.0% to 5.0%.

The Ministry of Trade and Industry narrowed down its full-year GDP forecast to 3.0%-4.0% from 3.0%-5.0%, citing weakening external demand.

In a report, the MTI cited four factors affecting the outlook for Singapore's economy, and one of them is the Russia-Ukraine conflict.

According to the MTI, further escalation of the war could "worsen global supply disruptions and exacerbate inflationary pressures through higher food and energy prices."

"More persistent and higher-than-expected inflation would dampen global growth further, including through even more aggressive monetary policy tightening in many advanced economies," the MTI said.

A slowdown in major external economies could affect growth in the water transport and finance & insurance sectors, added the MTI.

The MTI said it is also weary that financial stability risks would intensify "if there are disorderly market adjustments to monetary policy tightening in the advanced economies."

"In particular, the onset of large capital outflows from regional economies with high dollar-denominated debt levels could lead to tighter financial conditions and affect growth in these economies," the MTI added.

Another reason for MTI's weakened outlook is the possible escalation of geopolitical tensions which could lead to further disruption in supply chains.

Lastly, the MTI said it still can't rule out the risks of the COVID-19 pandemic, saying there could be more virulent strains of the virus.

"The global economic environment has deteriorated further. Stronger than-expected inflationary pressures and the more aggressive tightening of monetary policy in response are expected to weigh on growth in major advanced economies," the MTI said.

READ MORE: Economy grows at faster pace in Q2

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