SINGAPORE – Singapore is preparing to reopen its international borders and ease Covid restrictions next week, and that will be its “biggest economic driver of growth,” according to Brian Tan, chief regional economist at Barclays.
“According to our estimates, if mobility in places like leisure areas and workplaces increases only by 10%, you will get a growth of 3% to 4% of GDP. That is a fairly big jump,” Tan said. CNBC’s “Street Signs Asia” on Friday.
From March 29, people will be able to gather socially in groups of 10 instead of the current limit of 5 people. Singapore Prime Minister Lee Hsien Loong announced Thursday that more staff will be able to return to offices, and capacity limits for large events will also be increased.
“We also expect international travel to resume…there is a gap of about 4% of GDP that can be closed,” Tan added.
A survey of 12,000 travelers by Expedia found that Singapore residents are the least likely to travel during a pandemic (59%) and more likely to want to splurge (43%) on their next trip.
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However, with this growth comes domestic inflation pressures, coupled with already tight employment market and rising global commodity prices.
“This will pave the way for the Monetary Authority of Singapore to implement a fairly stringent tightening policy in April,” the analyst said, referring to the country’s central bank.
Analysts from research firm Capital Economics and DBS Bank said Friday they expect MAS to tighten policy at its meeting next month after the restrictions are included.
“We think this will be positive for the currency,” Tan said.
The Singapore dollar is trading at 1,356 Singapore dollars to the dollar. Singapore’s benchmark, the Straits Times Index, rose 0.5% on Friday, a day after a string of announcements on easing measures.
All fully vaccinated travelers and unvaccinated children aged 12 or younger can enter Singapore without having to apply for entry clearances from 1 April.
Tan added that reopening the borders would pave the way for a “good macroeconomic outlook” in Singapore, by helping to attract more foreign direct investment.
“The fact that we are able to reopen our doors to some other economies in Asia also suggests that it reinforces some of the safe haven status that Singapore has.”