Singapore's economic recovery and risks hinh anh 1Singapore carries out social distancing measures to prevent the spread of COVID-19 (Photo: Xinhua/VNA)

Singapore (VNA) - Singapore's economy is on track to recover from the worst recession in its history caused by the COVID-19 epidemic, but potential risks still exist.

There are currently four threats to the Singapore economy, of which the threat of a new COVID-19 variant is present. The raging Delta variant has caused many countries to tighten their safety measures this year and this is still affecting many Singaporeans.

UOB Group economist Barnabas Gan said Singapore's economic outlook will depend on the COVID-19 situation and any outbreak could pose risks to the country's economic recovery.

Meanwhile, inflation and a decline in global demand for electronics – the key export of Singapore's manufacturing sector are two other potential threats. As Singapore economic growth gains momentum, the risk of inflation is skyrocketing. Higher-than-expected inflation could prompt major central banks to reverse interest rate cuts to historic lows, where tight monetary policies could cause a slowdown in demand and global investment flows.

Currently, Singapore's exports of semiconductors and other high-end electronic components have been growing at an impressive rate with electronics exports in June increasing by 25.5 percent. However, if there are signs of a drop in demand, electronics manufacturers are to cut production and thereby lead to shortage in microchips and other components. The shortage in the global supply of semiconductors could limit the increase in electronic goods output.

In the context of the uncertain labour supply due to the COVID-19 epidemic, the construction sector faces a shortage of human resources as well as raw materials./.