SINGAPORE - Singapore's economic growth for the whole of 2021 came in at 7.6 per cent, up from the previous estimate of 7.2 per cent, the Ministry of Trade and Industry (MTI) said on Thursday (Feb 17).
MTI also revised its 2020 growth figure to a contraction of 4.1 per cent from an earlier estimate of minus 5.4 per cent.
This was after more comprehensive data from surveys showed better performance from sectors such as services, wholesale trade, transport and storage, and information and communications.
The gross domestic product growth forecast for 2022 was, however, maintained at 3 per cent to 5 per cent, MTI said in its Economic Survey report.
The upgrade for 2021 came after fourth-quarter GDP growth was revised to 6.1 per cent year on year, from the previous projection of 5.9 per cent.
Analysts said that the latest set of economic data highlights the resilience of Singapore’s economy despite the Covid-19-related risks.
At a media briefing, Mr Gabriel Lim, Permanent Secretary for Trade and Industry, said: “GDP growth in 2021 was mainly driven by the manufacturing, finance and insurance, and wholesale trade sectors.”
For 2022, MTI said the Singapore economy “is expected to continue to expand this year, although the outlook for the various sectors remains uneven”.
It said that growth prospects for outward-oriented sectors, such as manufacturing and wholesale trade, remain strong given the continued global economic recovery.
“In particular, the manufacturing sector is projected to continue to expand, albeit at a more moderate pace following the strong out-turn last year, supported by sustained global demand for semiconductors and semiconductor equipment,” MTI added.
Additionally, growth in the information and communications, and finance and insurance sectors is expected to remain healthy, driven by strong demand for information technology and digital solutions, and credit and payment processing services.
However, the recovery of the aviation- and tourism-related sectors, such as air transport and accommodation, is expected to be slow as recurring Covid-19 outbreaks and potential virus mutations could delay the lifting of travel restrictions globally, and travel demand is also likely to take time to recover, MTI said.
Moreover, the accommodation sector will be weighed down by a projected fall in domestic demand as government demand for hotel rooms to serve as quarantine facilities decreases and staycation demand drops with the relaxation of travel restrictions.
“Overall, activity in these sectors is expected to remain below pre-Covid-19 levels even by the end of 2022,” said MTI.
Meanwhile, the consumer-facing sectors, such as retail trade and food and beverage services, are projected to see a gradual recovery over the course of the year as domestic restrictions are progressively eased and consumer sentiments improve amid the turnaround in labour market conditions.
However, the real value-added of the F&B services sector and some tourist-reliant segments of the retail trade sector are not expected to return to pre-Covid-19 levels by end-2022, due in part to the slow recovery in visitor arrivals.
Activities in the construction, and marine and offshore engineering sectors are projected to continue to recover on the back of the progressive easing of border restrictions on the entry of migrant workers from South Asia.
Nonetheless, as it will take time to fully address the shortfall in labour required to meet business needs, labour shortages are likely to persist and weigh on the recovery of the sectors.
In particular, the output of the construction sector is expected to remain below pre-pandemic levels throughout 2022.
Still, a further progressive easing of domestic and border restrictions by the Government will support the recovery of Singapore’s consumer-facing sectors and alleviate labour shortages in sectors that are reliant on migrant workers.
Air travel and visitor arrivals are also expected to improve with the gradual loosening of travel restrictions and expansion of vaccinated travel lanes (VTLs).
The outlook for 2022 is also fraught with risks.
Mr Lim said that in the past few months, Singapore’s external demand outlook has deteriorated slightly as the Omicron wave led to a tightening of restriction measures in many economies.
“Meanwhile, global supply bottlenecks remain and are expected to persist throughout the first half of 2022, thereby constraining industrial production and GDP growth in the near term,” he said.
Those supply bottlenecks, alongside rising energy prices due to geopolitical tensions, have also exacerbated global inflationary pressures, he noted.
On the situation in Ukraine, where Russia and Nato are in a tense face-off, Mr Lim said the worst-case scenario could dampen the global economy and raise crude oil prices above the US$80 per barrel baseline assumption made in Singapore’s 2022 GDP forecast.
"You can model it every which way, from a short disruption all the way down to a very, very prolonged dampener for not just the global economy, but also for global business stability,” he said in response to a question.
Mr Lim said a spike in energy prices alone could exacerbate inflationary pressures and weigh on global economic growth.
Also, should monetary policy tightening in the advanced economies be faster than expected, market adjustments could be disorderly and risks to financial stability could intensify, he added.
However, he said, Singapore hopes the situation will be resolved peacefully in time.
Ms Selena Ling, chief economist and head of treasury research and strategy at OCBC Bank, said the risks cited in the Economic Survey were not unfamiliar.
“But the mitigating factors are Singapore’s high domestic vaccination rate and smooth roll-out of booster shots, which should pave the way for further easing of domestic and border restrictions, which in turn should aid the recovery of consumer-facing sectors and alleviate foreign manpower constraints,” she said.
UOB economist Barnabas Gan said: “Singapore’s overall economic prognosis remains optimistic.”
He said the manufacturing sector is expected to underpin growth. Meanwhile, tourism-related clusters such as retail, transport and hospitality will likely see further recovery, especially as many global economies embark on reopening their respective borders on the back of growing vaccination rates.
Mr Gan added that he will maintain his 2022 growth forecast at 3.5 per cent.
Ms Ling said: “The latest announcements of simplification of Covid-19 curbs and resumption and expansion of VTLs reinforce our expectations that there could be upside risks to our 3 to 5 per cent GDP growth forecast for this year.”