There appears to be cautious optimism on the prospects for the Singapore economy going forward. While there is some justification for this, the emphasis should be on the word "cautious". The growth numbers for the third quarter were encouraging. GDP was down 5.8 per cent year on year, better than the advance estimates of minus 7 per cent. Much of the improvement came from the 10 per cent year-on-year expansion of the manufacturing sector, a significant and surprising upside, given that the advance estimates had forecast only 2 per cent growth. Overall, the economy's better-than-expected performance in the third quarter enabled the Government to slightly raise its projection of the lower bound of the economy's contraction this year to 6.5 per cent from 7 per cent.
If the official forecast for positive growth of 4 per cent to 6 per cent in 2021 materialises, it will be the economy's best performance since 2011 - although the rebound would be from a low base. But this forecast is subject to major uncertainties. The most important is the prospect of slowing external demand. With both the United States and euro zone grappling with new waves of Covid-19 and having to re-impose lockdowns, economists are slashing their growth forecasts for these economies, both for the fourth quarter of this year and the first quarter of 2021. The timing of any economic stimulus is also uncertain. In the US, there is unlikely to be any stimulus until after the inauguration of President-elect Joe Biden on Jan 20, while the European Union stimulus still needs the buy-in of its member-states.