Singapore’s household spending to grow by 3.1% in 2022: Fitch Solutions

The growth rate estimate is lower than the 2021 forecast of 6.6%.

Singapore’s real household spending is expected to grow by 3.1% by 2021, according to a forecast by Fitch Solutions.

Whilst the estimate is lower compared to the 2021 forecast of 6.6%, Fitch Solutions said household spending is already returning to its medium-term (2022-2026) trajectory.

“With our medium-term real household spending forecast at 2.5% a year, consumer spending over 2022 is gradually returning to this trajectory,” the analyst said.

Fitch Solutions said their real consumer spending growth estimate is in line with its Country Risk team’s forecast of Singapore's economy growing by 3.6% in 2022.

“Economic growth in 2022 will also be underpinned by a recovery in the country's tourism industry as authorities continue to add new countries to the Vaccinated Travel Lane scheme, with tourist arrivals forecast to increase by 330% over the year,” Fitch said.

A 2.2% decline in the unemployment rate is also expected to drive recovery in private consumption, according to Fitch.

However, Fitch Solutions said the estimate could change, especially in the first half of 2022, due to several risks including elevated inflation and the possibility of new COVID-19 variants, amongst others.

“We believe that rising consumer price inflation is a key risk to consumer spending over 2022, as it has the potential to erode purchasing power,” the analyst said.

Based on data provided by Fitch Solutions, Singapore’s inflation has been “ticking upwards,” reaching a high of 3.8 year-on-year in November 2021, mainly due to higher services inflation.

Though very little, Fitch said household debt also poses risk to the consumer spending outlook over the medium-term.

Household debt reached 54.3% of the gross domestic product in 2021, according to the second quarter 2021 figures.

“Should household debt servicing costs get too high, it would lead households to reallocate spending away from other consumer spending segments,” Fitch said.

Data from the Urban Redevelopment Authority showed that private property values climbed 5% quarter-on-quarter, which is the highest quarterly growth since the second quarter of 2010 when prices jumped 5.3%.

For 2021, prices increased by 10.6%, also the highest since 2010.

For consumer spending to recover, Fitch Solutions said the government should be able to vaccinate a large enough portion of Singapore's population.

As of 6 January 2021, 83.1% of Singapore's population have been fully vaccinated.

The analyst said vaccination leads to a drop in infection and hospitalisation thus leading to the gradual lifting of restriction, which in turn will boost consumer confidence and retail sales.

Overall retail sales in Singapore for 2021 averaged at an index score of 93.5, which is still 6.5% lower than the 99.9 records in 2019.

“Retail sales growth in Singapore is still largely following the level of restrictions in the country, but there has been a noticeable uptick since August 2021, suggesting that retail sales may soon breach pre-COVID-19 levels,” Fitch said.