SINGAPORE - Singapore’s economic growth will rebound in 2021 by the most in a decade, helped by a low base, but gross domestic product will probably not return to pre-Covid-19 levels until the end of next year.
The economy will also contract by 6.5 to 6.0 per cent in 2020, compared to the previous estimate of -7 to -5 per cent, the Ministry of Trade and Industry said on Monday (Nov 23) while presenting the Economic Survey of Singapore.
The forecast for 2020 has been narrowed due to Singapore's better than expected economic performance in the first three quarters, said Mr Gabriel Lim, Permanent Secretary for Trade and Industry, in his opening remarks at a virtual press briefing on Monday.
The economy is expected to grow by 4.0 to 6.0 per cent in 2021 - the highest since at least 2011 when the economy expanded by 6.3 per cent - helped by continued expansion of trade and manufacturing and a gradual recovery in construction and aviation- and tourism-related sectors, he said.
"While growth is expected to rebound from the low base this year, our economic recovery is expected to be gradual, with GDP not likely to return to pre-Covid levels until the end of 2021," Mr Lim noted.
"Furthermore, there remains uncertainty over how the Covid-19 situation will evolve globally in the year ahead, which will depend in part on the progress in vaccine development, production and distribution," he added.
In the third quarter this year, the economy expanded by 9.2 per cent on a quarter-on-quarter seasonally adjusted basis, a turnaround from the 13.2 per cent decline in the second quarter, latest data in the Economic Survey showed.
On a year-on-year basis, the economy shrank by 5.8 per cent, a smaller contraction than the 13.3 per cent slump in the second quarter. That was also better than the previous estimate of a 7 per cent contraction, though slightly worse than the 5.5 per cent drop tipped by economists in a Bloomberg poll.
The improved performance came on the heels of the phased resumption of activities in the third quarter following the circuit breaker that was implemented from April 7 to June 1, as well as the rebound in activity in major economies during the quarter as they emerged from their lockdowns.
The economy has contracted by 6.5 per cent on a year-on-year basis in the first three quarters of the year.
For 2021, the economy is projected to return to growth amid improved growth outlook for key external economies, as well as a further easing of global travel restrictions.
Trade-related services sectors such as wholesale trade are expected to benefit from the pick-up in external demand.
At the same time, the manufacturing sector may to continue to expand, with growth in the electronics and precision engineering clusters boosted by robust semiconductor demand from the 5G market.
Likewise, growth in the information and communications, and finance and insurance sectors is expected to remain healthy.
Aviation- and tourism-related sectors such as air transport and accommodation are projected to see a gradual recovery in air passenger volumes and visitor arrivals.
Improved visitor arrivals and consumer sentiment will in turn benefit consumer-facing sectors like retail and food services. However, economic activity in these sectors is not likely to return to pre-Covid-19 levels even by end-2021.
The construction sector is likely to recover from a low base this year, although construction activity will continue to be dampened by the implementation of safe management measures.
Mr Edward Robinson, the Monetary Authority of Singapore’s deputy managing director, hinted at no change in the central bank’s policy stance of a zero per cent appreciation of the trade-weighted Singapore dollar.
He said at Monday's briefing that the MAS stance already takes into account possible alternative scenarios and outcomes for the projections going forward and the next policy meeting and decision will be in April as scheduled.
Mr Kenny Tan, a director at the Ministry of Manpower, said employers are likely to take a cautious view towards fresh hiring and, hence, unemployment will likely remain at elevated levels even as the economy rebounds next year.
Minister for Trade and Industry Chan Chun Sing said that while Singapore is turning the corner in its economic recovery, it still has a long way to go as it adapts to the new realities of the Covid-19 world.
While growth will improve from a quantitative perspective next year, the overall economy will change permanently qualitatively, he said at the briefing.
The Government will continue to support businesses and workers in their transformation in this new economy, said Mr Chan. He highlighted programmes such as Scale-Up and Enterprise Leadership for Transformation as part of this move aimed at improving the job matching between employers and employees, and helping companies seek new revenue streams.
“If we are able to help our businesses and workers make the necessary adjustments and pivot quickly, I have every reason to believe that we will emerge in a stronger position than before,” he 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 in spite of the recovery next year.
“But the risk of a sharper spike in lay-offs and the unemployment rate may be somewhat limited by the extension of the Jobs Support Scheme (JSS), the various loan moratoriums and other assistance schemes into 2021,” she said.
The JSS, which was launched at the start of the pandemic to help companies retain staff by covering their salaries, was extended in August to March 2021.
Ms Ling said the Government has also hinted that the 2021 Budget due in February will still be expansionary and, hence, protecting local jobs and preserving livelihoods will likely remain a key focus, in addition to helping the economy and businesses transform to compete in a post-Covid-19 environment.