Singapore's economy is likely to take longer to recover from the Covid-19 crisis than it did in past recessions, the Monetary Authority of Singapore (MAS) said yesterday.
Part of the reason is a drop in earnings for businesses and lower incomes for households. Coupled with greater uncertainty, these restrain spending and investment.
As a result, the pace of recovery is expected to moderate in the quarters ahead, the central bank added in its twice-yearly macroeconomic review released yesterday.
Some pockets of the economy are not expected to recover to pre-pandemic levels even by the end of next year.
Citing the travel-related sector and some contact-intensive domestic services as examples, MAS said that activity "could still fall short of pre-pandemic levels until health risks abate".
It further expects employment recovery to be uneven and slow.
On the jobs front, the unemployment rate among Singapore residents is likely to remain high next year, keeping wage growth low. This is unlike during the 2008 global financial crisis, when the rate returned to pre-crisis levels after six quarters.
In its report, MAS noted the Covid-19 pandemic has disproportionately hurt domestic-oriented and travel-related services, such as food and beverage, retail, construction, aviation and hospitality.
As these sectors have stronger interlinkages with local firms and households, there has been a more severe impact locally, especially on jobs and consumption.
Previous recessions were typically driven by the manufacturing sector, which is externally oriented.
Meanwhile, the pace of recovery could be affected by a resurgence in Covid-19 infections worldwide, causing more shutdowns and weaker external demand that would worsen conditions in Singapore.
"The path ahead remains clouded with uncertainty," said MAS.
It reiterated the Government's forecast for the economy to shrink by a record 5 per cent to 7 per cent this year. Next year, the economy is expected to post growth that is higher than the average in the past several years, but that is because of the effects of the low base this year.
Singapore's economy shrunk by a historic all-time low in the second quarter as a result of circuit breaker measures, but growth rebounded in the third quarter mainly due to the easing of some curbs on movement.
Overall, the gross domestic product (GDP) in the second quarter contracted by 13.2 per cent on a quarter-on-quarter seasonally adjusted basis. Using the same measure, the third quarter rebound saw the economy expand by 7.9 per cent.
While some sectors, mainly export-driven manufacturing, have seen a pickup, overall output is still some 7 per cent below pre-Covid-19 levels, MAS noted.
The third-quarter rebound was also fuelled by the Government's budgetary support measures.
But the fiscal boost is likely to lessen later this year even though some measures, like the Jobs Support Scheme, will continue - albeit at lower levels of support.
Noting the unprecedented intensity of the Covid-19 recession, MAS said it resulted in a cumulative 14 per cent drop in GDP from pre-crisis levels to the trough in the middle of this year. This compares with an average contraction of 6.1 per cent in the previous recessions.
As for global recovery, MAS expects the near-term rebound - supported by unprecedented fiscal and monetary policies - to fade.
Global GDP is projected to shrink by 3.9 per cent this year.
Next year, the world economy is forecast to grow by 6.2 per cent but that will still be about 4 per cent below the level projected before the Covid-19 shock.