By Chen Lin and Aradhana Aravindan
SINGAPORE (Reuters) - Singapore's economy is expected to grow about 7% in 2021, at the top of the official forecast range, and will expand at a slower pace next year as an uneven recovery continues across sectors, the government said on Wednesday.
The Ministry of Trade and Industry (MTI) forecast the economy to grow 3% to 5% next year.
"The recovery of the various sectors of the economy is expected to remain uneven in 2022," said Gabriel Lim, permanent secretary for trade and industry.
He expects outward-oriented sectors such as manufacturing and wholesale trade to remain strong, while activity in aviation- and tourism-related sectors would remain below pre-COVID levels throughout 2022.
Gross domestic product (GDP) grew 7.1% year-on-year in the third quarter, the MTI said, higher than the 6.5% expansion seen in the government's advance estimate and analysts' expectations in a Reuters poll.
On a quarter-on-quarter seasonally-adjusted basis, the economy expanded 1.3% in the third quarter.
The small and open economy, which has fully vaccinated about 85% of its 5.45 million population, eased some COVID-19 safety measures this week and has opened quarantine-free travel lanes with several countries.
"Recovery has definitely started, the reopening borders and easing of mobility restrictions could help consumer facing sectors," Maybank Kim Eng economist Lee Ju Ye. "But it's still going to be a slow pace of normalisation."
The MTI said protracted supply disruptions alongside a stronger pickup in demand, as well as rising energy commodity prices, could lead to more persistent inflation.
External inflationary pressures are likely to remain elevated, while wage growth is expected to strengthen as the domestic labour market continues to recover.
Around the world, policymakers have turned their attention to inflationary risks from supply constraints and a recovery in the global economy.
Singapore's central bank tightened its monetary policy in a surprise move at its last meeting in October. At least five economists expect the Monetary Authority of Singapore (MAS) to act again at its next policy meeting in April.
The MAS will carefully watch inflation dynamics and stay vigilant on price developments when it decides its next policy move, expected in April, Edward Robinson, its deputy managing director, told a media briefing.
Singapore kept its forecast for headline inflation to come in at about 2% this year, and average 1.5-2.5% in 2022.
Data this week showed Singapore's key price gauge rose by the fastest pace in nearly three years in October, mainly driven by higher services and food inflation, while headline inflation rose at the fastest pace since March 2013.
"If we continue to see the inflation overshoot past the first quarter of next year, and if all these supply chain disruptions don’t ease, the question is then potentially how aggressive (the tightening) may be," said Selena Ling, head of treasury research and strategy at OCBC, adding that she sees a "very high probability" for tightening in April.
The economy shrank a record 5.4% due to the COVID-19 pandemic in 2020.