Singapore's economic growth could surpass the Government's forecasts, despite the latest round of tighter Covid-19 restrictions.
The Republic's gross domestic product (GDP) may expand by 6.5 per cent this year, taking it beyond the Government's estimated 4 per cent to 6 per cent range, according to the latest quarterly survey of private-sector analysts released by the Monetary Authority of Singapore (MAS) yesterday. In March, the analysts had estimated a yearly growth of 5.8 per cent.
The revision comes after the economy grew by 1.3 per cent in the first quarter, when survey respondents had forecast a 1.1 per cent contraction.
Analysts said that the Covid-19 restrictions rolled out in Singapore in recent weeks are not expected to weigh too heavily on the overall recovery picture.
CIMB Private Banking economist Song Seng Wun pointed to the momentum seen from the stronger-than-expected performance in the first quarter, and noted that most sectors in Singapore have still been able to operate despite the tighter measures under the heightened alert phase.
It is largely the consumer-facing sectors like retail and food and beverage which have been hit, he added.
OCBC Bank head of treasury research and strategy Selena Ling highlighted that the low base seen last year in addition to the expectation that tighter measures will be gradually lifted also contributed to the view that any adverse performance during this period is only a "temporary speed bump to growth recovery".
"Moreover, the vaccination pace has been stepped up and vaccine supply is expected to resolve in the coming period," she said.
Analysts also expect the economy to grow 15 per cent year on year in the second quarter, benefiting from the low base due to Singapore's worst-ever quarter on record a year ago when GDP plunged 13.2 per cent amid the circuit breaker.
The forecast for growth next year has also been raised to 4 per cent from 3.8 per cent tipped in the March survey.
Effective containment of the Covid-19 outbreak topped the list of factors that could see the economists raising their growth outlook for Singapore.
They also flagged the stronger-than-expected manufacturing sector performance, driven in part by robust global demand for electronics, as a big upside factor. The prospect of reopening borders to international travel could also be a boon to the economy.
At the same time, deterioration in the pandemic situation and tighter public health measures as a result was the top downside risk to the growth outlook.
The respondents were also concerned about geopolitical risks, including those stemming from United States-China tensions, and a slower-than-expected labour market recovery, which could weigh on private consumption.
Maybank Kim Eng senior economist Chua Hak Bin highlighted that Singapore is dependent on external demand, and the stronger manufacturing and export outlook is cushioning the impact of weaker domestic spending from the tighter Covid-19 restrictions here.
Continued strength in manufacturing and professional services will help offset the sectors worst hit by the heightened restrictions, such as food and beverage, retail, construction and hospitality, he added.
Ms Ling said: "The main downside risk is if the borders don't reopen, then manpower costs will continue to be the extra whammy for the construction and other labour-intensive sectors."
This is in addition to the periodic setbacks that new Covid-19 variants and resurgence in infections could disrupt economic activities, she added.
The survey was sent out on May 25. It reflects the views of 24 respondents and not MAS' own forecasts.
Analysts expect a lower unemployment rate of 2.7 per cent at the year end, down from the 2.9 per cent forecast in March.
Inflation, measured by the consumer price index for all items, is expected to come in at 1.4 per cent for the year, higher than the median forecast of 0.9 per cent in March. The median forecast for core inflation, which excludes volatile accommodation and private transport costs, was raised to 0.8 per cent from 0.7 per cent previously.
