SINGAPORE: Singapore has maintained its growth forecast for 2021 at 4 to 6 per cent, said the Ministry of Trade and Industry (MTI) on Monday (Feb 15).
The economy shrank by 5.4 per cent in 2020, slightly better than the advance estimate of a 5.8 per cent contraction and above the Government’s forecast range of -6 to -6.5 per cent.
AdvertisementAdvertisementNonetheless, this is Singapore's first annual contraction since 2001 and its worst recession since independence.
Last week, Prime Minister Lee Hsien Loong said the bulk of Singapore's economy is expected to recover this year but some sectors - such as transport, tourism and aviation - may take a longer time to do so.
[h=3]READ: Singapore economy expected to bounce back this year, bulk of it 'should be able to recover': PM Lee[/h]MTI said it had taken into account developments in the global and domestic economic environment for the decision to maintain its 2021 forecast range.
AdvertisementAdvertisementFor instance, there has been further progress in the development and deployment of COVID-19 vaccines since its last economic survey in November.
Although the speed of vaccine deployment varies, advanced economies like the US and Eurozone are likely to reach population immunity by the second half of this year, which should, in turn, spur their economic recoveries, MTI said.
On the other hand, the growth prospects for regional economies such as Malaysia and Indonesia have weakened due to the recent resurgence in infections, which has necessitated the re-imposition of lockdowns and restrictions.
“On balance, as the positive developments in the key external economies broadly offset the negative ones, Singapore’s external demand outlook remains largely similar compared to three months ago,” the ministry said in its report.
AdvertisementMTI also flagged several uncertainties and risks that remain in the global economy.
These include significant uncertainty surrounding the course of the pandemic and the trajectory of the global economic recovery; the risk of financial system stresses that could emerge from a protracted economic recovery and continued geopolitical uncertainty involving the major economies.
Domestically, while Singapore’s COVID-19 situation remains under control and the vaccination programme is underway, the pace of border re-opening has slowed amidst the global surge in COVID-19 cases and the emergence of more contagious strains of the virus, MTI said.
Against this external and domestic backdrop, the Singapore economy is expected to see a gradual recovery over the course of the year, although the outlook remains uneven across sectors, it added.
OUTLOOK FOR SECTORS
First, the outward-oriented sectors are likely to benefit from the pick-up in external demand. The manufacturing sector, in particular, is set to expand at a faster pace than previously projected due to robust semiconductor demand from the 5G and automotive markets.
The information and communications, and finance and insurance sectors are also expected to continue to post steady growth, supported by sustained enterprise demand for IT and digital solutions, and credit and payment processing services respectively.
Second, the tourism- and aviation-related sectors, such as accommodation and air transport, are projected to see a weaker recovery than previously expected due to the slower-than-anticipated lifting of global travel restrictions, as well as sluggish travel demand.
These sectors are not expected to return to pre-COVID levels even by the end of the year, MTI said.
It will be a similar case for consumer-facing sectors such as retail trade, and food and beverage services.
While these are expected to benefit from an improvement in consumer sentiments amid a gradual turnaround in labour market conditions, slower recovery in visitor arrivals and capacity constraints arising from safe management measure will likely mean they would not return to pre-COVID levels by end-2021.
Lastly, while the construction and marine and offshore engineering sectors are projected to recover from the low base last year, activity levels at construction worksites and shipyards will continue to be dampened by the requirement for safe management measures.
The recovery in output in these two sectors is also expected to be slow due to the plunge in contracts awarded for construction works in 2020 and the weakness in the global oil and gas market respectively, MTI said.
HOW THE ECONOMY FARED IN 2020
For the whole of 2020, the Singapore economy contracted by 5.4 per cent, a reversal from the 1.3 per cent growth recorded in 2019.
“This represented the worst full-year recession since Singapore’s independence, and was a direct result of the economic fallout from the COVID-19 pandemic,” said MTI’s permanent secretary Gabriel Lim at a press conference on Monday morning.
He added that most sectors of the economy, particularly those related to tourism and aviation, contracted in 2020 but there were also bright spots.
Manufacturing was one such sector, expanding 7.3 per cent for the full year on the back of robust expansions in the biomedical manufacturing, electronics and precision engineering clusters. This marked a turnaround from the 1.5 per cent contraction in 2019.
[h=3]READ: Singapore economy could have contracted 12.4% if not for COVID-19 Budget measures: MAS estimates[/h]The construction sector shrank by 35.9 per cent, a sharp retraction from the 1.6 per cent growth posted in 2019, pulled down by weakness in both public sector and private sector construction works.
The services producing industries contracted by 6.9 per cent, reversing the 2 per cent growth in 2019.
Most services sectors saw a full-year contraction due to the widespread economic impact of the COVID-19 pandemic, except for the finance and insurance, and information and communications sectors, MTI said.
For the final quarter of 2020, the Singapore economy contracted by 2.4 per cent on a year-on-year basis, an improvement from the 5.8 per cent contraction in the preceding quarter.
On a quarter-on-quarter seasonally-adjusted basis, the economy expanded by 3.8 per cent, following the 9.0 per cent growth recorded in the previous quarter.
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