The global economic outlook continues to be highly uncertain and will weigh on a small and open economy such as Singapore.
But the Republic can continue to expect gross domestic product (GDP) growth of 4 per cent to 6 per cent this year, barring unforeseen circumstances, said Finance Minister Lawrence Wong yesterday.
Noting that the global outlook depends critically on the path of the Covid-19 pandemic, he said that a faster-than-anticipated global vaccine roll-out and effective containment of the virus could boost growth prospects.
But there are many downside risks, including the threat of new waves of infection, which could force a return to lockdowns in some places and affect the reopening of borders, he said.
"As a small open economy, Singapore's outlook depends crucially on these external developments. The uncertainty surrounding our economic outlook is therefore larger than usual."
In May, the Ministry of Trade and Industry maintained its growth forecast for this year at a range of 4 per cent to 6 per cent.
But the recovery will be uneven across sectors, said Mr Wong.
For example, the construction, marine and offshore engineering sectors are not short of projects, but face a manpower crunch due to Covid-19 restrictions.
While the Government has provided foreign worker levy rebates and other support measures to cushion the blow, these cannot fully make up for the shortage of workers, said Mr Wong.
He said that recovery will be more gradual in hard-hit sectors such as aviation and tourism, as it will take a longer time for international air travel volumes to return to pre-pandemic levels.
There may be some consolidation in these industries, he said, and the Government will do its part to reskill affected workers and help them transition to other growing sectors.
"At the same time, we will continue to provide targeted support for these industries to preserve their core capabilities and position them for recovery, which will come when travel restrictions are eventually lifted."
One important part of the recovery process, he said, is the reopening of Singapore's borders.
This is an existential issue for Singapore, because it survives and thrives on its ability to connect businesses and people to the region and the world.
Mr Wong said there has been feedback from the business and investment community that Singapore might lose out to other hubs that are moving more aggressively to reopen their borders.
Singapore understands their concerns, he said, but is also very mindful that if it reopens prematurely before reaching high-enough vaccination rates, it could end up with another wave of infections and a surge in hospitalisation and intensive care unit cases.
"So our priority is to speed up vaccinations. And we have the ability to reach a very high level of vaccination coverage in the next one to two months," he said.
"This will enable us to progressively reopen and reconnect with the world. We are already discussing with other jurisdictions that have effectively controlled infections, working out travel corridors with them for vaccinated persons to travel more freely, either without the need for stay-home notice or with a reduced SHN duration."