SINGAPORE: In the midst of a global recovery from the worst of the coronavirus pandemic and as travel restrictions and local protection measures are relaxed, Singapore said its economy will likely grow 4 percent to 6 percent next year.
As the Ministry of Trade and Industry said in a statement Monday, the city-state also narrowed its forecast for this year’s contraction, reflecting an improved outlook for manufacturing, powered primarily by electronics.
“On balance, the Singapore economy is expected to return to growth in 2021, given the improved growth outlook for key external economies, as well as the further easing of global travel restrictions and domestic public health measures expected in the coming year,” MTI said.
The updated forecast from Singapore comes as recent breakthroughs in vaccine advances lift expectations that the pandemic can be controlled. However, threats, including new lockdown steps and premature removal of policy support, remain.
It will also not be easy to relax travel restrictions, most recently seen as rising virus cases in Hong Kong delayed the start of a much-anticipated travel bubble between the two financial hubs in Asia.
Selena Ling, Head of Treasury Research and Strategy at Oversea-Chinese Banking Corp in Singapore, said The bigger picture depends on the progress of the vaccine and how the recent global resurgence will hurt external demand and prospects for the reopening of international borders.”
“For now, domestically-oriented services remain held at ransom by the innovations of Covid.”
After the economic forecasts were released, the Singapore dollar was stable, trading 0.1 percent higher at 1.3422 against the greenback at 9.35am local time.
In a briefing after the publication, Singapore’s recovery relies heavily on factors outside its influence, including the changing US-China relationship, repeated waves of virus infection, and vaccine innovations, Trade and Industry Minister Chan Chun Sing said.
“The road forward lies in greater interdependence rather than independence or independence,” he said, referring to the ties between the two largest economies in the world.
We do not yet know how their ties with China will be handled by the new US administration. We hope, however, that both sides will minimise tensions and return to a more open and inclusive global economic system.
Chan also warned that the enthusiasm about vaccine advances recently may be misplaced, as it won’t be the quick fix that many expect it to be with “many months, if not years, of production, distribution and application.”
Edward Robinson, Deputy Chief Executive Officer and Chief Economist at the Singapore Monetary Authority, said that monetary policy remains appropriate at this time, and that he expected the MAS to meet again in April as planned.
There is an ongoing impulse of support” from monetary and fiscal policies that flow through the economy, he said.”
MTI updated its forecast for 2020 to a 6 percent -6.5 percent contraction, narrower than the 5 percent -7 percent downturn expected earlier. It also said that in the three months through September, the economy shrank less than previously expected.
According to final estimates published by MTI, gross domestic product decreased 5.8 percent in the third quarter from a year earlier.
That was better than the previous 7 percent contraction prediction, and compared to a median forecast of -5.5 percent in an economists’ Bloomberg survey.
Healthier exports and industrial development have prompted economists to upgrade their growth forecasts for Singapore, including Maybank Kim Eng Research Pte Ltd.
In the final third-quarter forecast, the bank had expected that the city-state would post a 5.1 percent contraction, supported in particular by the development and improvement of pharmaceuticals in real estate, retail trade, and transportation and storage, according to a survey last week.
In Singapore, an easing in the virus count has provided space to policymakers seeking to relax restrictions that have impeded business re-openings.
For much of the past few weeks, the regular number of new incidents, including incoming travellers requested to be quarantined, has hovered in single digits.
After promising around S$100 billion in aid so far this year, Singapore officials have said there is still space to provide further fiscal stimulus.
Prime Minister Lee Hsien Loong said he sees the government running a deficit in the budget at least until the beginning of next year and maybe a while’ longer, in order to help ailing customers and companies.
On a quarterly basis, the Singapore economy expanded by 9.2 percent from the previous three months on a non-annualised basis. The data follows a 13.3 percent decline in the second quarter from the same time in 2019, which marked a data record dating back to 1990.