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Better year ahead for Singapore economy
SINGAPORE: Private-sector economists have lowered their 2020 forecast for Singapore’s economy but they turned more bullish over the strength of a recovery next year and suggest the worst of the coronavirus-induced contraction came in the second quarter.
The economy may shrink by 6% this year, according to a quarterly survey of 26 economists and analysts by the Monetary Authority of Singapore (MAS), slightly worse than the 5.8% contraction predicted in the previous June survey. However, the professional forecasters expect growth in gross domestic product (GDP) to recover to 5.5% in 2021, up from the 4.8% they had tipped earlier, MAS said in its survey report released yesterday.
The Ministry of Trade and Industry (MTI) last month lowered its outlook for the fifth time this year, with the economy now forecast to shrink by 5% to 7%. This would make this year’s recession Singapore’s worst since independence. So far, there is no official forecast for 2021.
For the third quarter of this year, the analysts expect the economy to contract by 7.6% year on year, easing from the record 13.2% plunge in the second quarter.
MTI is likely to issue advance estimates for the July-September period later this month.
A further deterioration in the coronavirus situation, due to further waves of outbreaks or delays in vaccine development, topped the list of downside risks to Singapore’s growth outlook identified in the survey.
Ninety per cent of the respondents cited the risk of a secondary outbreak and 75% ranked it as the top downside risk.
An escalation in US-China tensions was identified by 60% as a downside risk, compared to 55.6% in the previous survey.
Respondents were also concerned about risks stemming from a slower-than-expected global economic recovery, with 25% identifying it as a risk, up from 16.7% in the earlier survey.
Meanwhile, the containment of the Covid-19 outbreak, due for instance to the successful global deployment of a vaccine, again emerged as the most frequently cited upside risk to Singapore’s growth outlook. Seventy-five per cent of the respondents listed it and 60% ranked it as the top upside risk.
Respondents also identified stronger-than-expected manufacturing sector performance, led by electronics and pharmaceuticals production, as a key upside risk. This was identified by 40% of respondents, compared to 55.6% in the previous survey.
In addition, 30% of respondents flagged easing US-China tensions as a potential upside risk to the outlook, up from 16.7% in the previous survey.
Taking the mean probability distribution in the latest MAS survey, the most likely outcome for the Singapore economy is a contraction of 5.1% to 7% this year, with a 62.2% average probability assigned to this range.
In the June survey, the most likely outcome for 2020 had been projected at minus 6% to minus 4.1%, with an average probability of 53.3%.
For the labour market, the respondents expect the seasonally adjusted unemployment rate to ease slightly to 3.5% at the end of 2020, from 3.6% in the previous survey.
The CPI-All items inflation and MAS core inflation for the third quarter 2020 are expected to come in at minus 0.6% and minus 0.4%, respectively. — The Straits Times/ANN