The manufacturing sector will continue to be the main driver of Singapore's rebound from the coronavirus-induced recession, analysts said yesterday.
However, most of the services clusters are likely to recover at a more gradual pace next year.
They said the maiden forecast for positive growth of 4 per cent to 6 per cent next year by the Ministry of Trade and Industry was pretty much on the mark and takes into account the uncertainties still surrounding the pandemic.
Mr Irvin Seah, senior economist at DBS Bank, said the manufacturing sector has been fundamental to Singapore's economic turnaround and is expected to remain a key driver of growth in the coming quarters.
The electronic sector, which forms the bulk of manufacturing, is riding the strong pick-up in the global electronics cycle with fresh demand for electronic gadgets from companies worldwide turning to digital solutions to overcome the disruptions to business processes, and encouraging employees to work from home.
"Further adoption of the 5G networks and WiFi 6, on top of the continued proliferation of artificial intelligence, Internet of Things, electric vehicles and introduction of new smartphone models and wearable devices will continue to drive demand for high-end electronics parts and components," said Mr Seah.
All of these will bode well for Singapore's electronics cluster heading into next year, he noted.
Analysts expect the global backdrop to remain favourable for Singapore's economy.
Mr Barnabas Gan, economist at UOB Group, said the favourable backdrop includes the recent signing of the Regional Comprehensive Economic Partnership and the election of Mr Joe Biden as the next US president, who may take a more multilateral approach in trade with other countries.
While safe management measures are likely to keep construction activity subdued next year, most analysts believe growth performance of the sector should continue to improve in the coming quarters amid the existing backlogs and strong pipeline of residential and infrastructure projects.
The sector jumped 34.5 per cent quarter on quarter seasonally adjusted in the July to September period, reflecting a strong rebound from the second quarter, when it shrank by 59.5 per cent.
Mr Edward Lee, Standard Chartered Bank's chief economist for Asean and South Asia, said the sector is likely to sustain the recovery in the coming quarters, supported by demand from the public sector, barring the risk of a resurgence in infections.
While some gradual improvement is expected in the service sector, the industries that are worst hit by the pandemic - hospitality and aviation - will continue to struggle.
A slower turnaround for services would keep unemployment at elevated levels, analysts said.
Ms Selena Ling, OCBC Bank's chief economist and head of treasury research and strategy, said that Singapore's labour market may continue to see some downward pressure.
"But the risk of a sharper spike in layoffs and the unemployment rate may be somewhat limited by the extension of the Jobs Support Scheme (JSS) to March, the various loan moratoriums and other assistance schemes into 2021," she said.
Ms Ling said the Government has also hinted that the 2021 Budget due in February will still be expansionary.
