Singapore sees return to growth in 2021 on global recovery

• Nov 24, 2020

SINGAPORE: Singapore said its economy will probably expand 4% to 6% next year amid a global recovery from the worst of the coronavirus pandemic and as travel restrictions and local safety measures are eased.

The city-state also narrowed its forecast for this year’s contraction, the Trade and Industry Ministry (MTI) said in a statement, highlighting an improved outlook for manufacturing, driven primarily by electronics.

“On balance, given the improved growth outlook for key external economies, as well as a further easing of global travel restrictions and domestic public health measures that is expected in the year ahead, the Singapore economy is projected to return to growth in 2021, ” MTI said.

Singapore’s revised forecast comes as recent breakthroughs in vaccine developments raise hopes the pandemic can be contained. Risks remain though, including fresh lockdown measures and premature withdrawal of policy support. Easing travel restrictions also won’t be straightforward, most recently seen as rising virus cases in Hong Kong delayed the start of a much-anticipated travel bubble between the two Asian financial hubs.

“The bigger picture is dependent on the vaccine progress and how the recent global resurgence will hurt external demand and prospects for re-opening of international borders, ” said Selena Ling, head of treasury research and strategy at Oversea-Chinese Banking Corp in Singapore. “Domestically-oriented services remain held at ransom by the Covid developments for now.”

Singapore’s dollar was steady after the economic forecasts were published, trading 0.1% higher at 1.3422 against the greenback as at 9:35am local time yesterday.

Edward Robinson, deputy managing director and chief economist at the Monetary Authority of Singapore (MAS), said monetary policy remained appropriate at this time, and that he expected the MAS would meet again as scheduled in April.

“There’s a continuing support impulse” from monetary and fiscal policy flowing through the economy, he said.

For 2020, MTI revised its outlook to a contraction of 6%-6.5%, narrower than the decline of 5%-7% forecast earlier. It also said the economy shrank less than previously estimated in the three months through September.

Gross domestic product declined 5.8% in the third quarter from a year earlier, according to final estimates released by MTI. That was better than the previous estimate of a 7% contraction, and compares with a median forecast of -5.5% in a Bloomberg survey of economists. — Bloomberg