SINGAPORE: The Singapore economy is expected to shrink between 6 per cent and 6.5 per cent this year, said the Ministry of Trade and Industry (MTI) on Monday (Nov 23) in another revision to its 2020 outlook after growth data confirmed a smaller-than-expected contraction in the third quarter.
Its previous estimate, announced in August, was for the economy to contract between 5 per cent and 7 per cent.
Policymakers also offered for the first time a glimpse of their economic forecast for 2021 – a recovery into positive growth territory, with the economy envisaged to expand between 4 per cent and 6 per cent next year.
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For the third quarter, Singapore’s gross domestic product (GDP) contracted by 5.8 per cent on a year-on-year basis, more than halving a record slump of 13.3 per cent in the previous quarter when the COVID-19 “circuit breaker” was in place.
Compared on a quarter-on-quarter seasonally adjusted basis, the economy rebounded by 9.2 per cent following a 13.2 per cent decline in the previous three months.
Both figures for the third quarter were better than the Government’s advance estimates of a 7 per cent year-on-year contraction and a 7.9 per cent quarter-on-quarter expansion.
Apart from a gradual reopening of the Singapore economy in June that allowed a recovery in economic activities, the improved GDP performance came alongside a similar rebound in activities in major economies during the quarter as they emerged from their lockdowns, MTI said.
But it noted that uncertainties remain, with the global economic situation remaining subdued.
“While some economies like China are expected to see a sustained recovery for the rest of 2020 as their domestic COVID-19 outbreaks remain under control, others like the US and Eurozone are experiencing a resurgence in infections, which may dampen their recovery as restrictions are reimposed to slow the spread of the virus,” it said.
Domestically, the pandemic continues to have an uneven impact on various sectors, with trade-related services sectors likely to remain weakened.
GRADUAL RECOVERY AHEAD
The recovery of the Singapore economy in the year ahead is expected to be “gradual”, said MTI.
“(It) will depend to a large extent on how the global economy performs and whether Singapore is able to continue to keep the domestic COVID-19 situation under control,” it added.
Globally, major advanced and developing economies are expected to recover from the massive economic disruptions caused by COVID-19 and see a rebound in their GDP from the low base this year. But this is expected to be slow and uneven across economies, with many economies not likely to return to pre-COVID-19 levels until the end of the year.
Risks persist, it said, citing the periodic resurgence of infections around the world, the re-imposition of lockdowns, the protracted nature of the economic recovery in many countries as well as geopolitical uncertainties.
READ: Singapore economy 'turning the corner', but recovery still a long way to go - Chan Chun Sing
Domestically, trade-related services sectors are expected to benefit from the pick-up in external demand.
At the same time, the manufacturing sector will likely continue to expand, boosted by the electronics and precision engineering clusters; while the information and communications, and finance and insurance sectors are expected to remain healthy.
Hard-hit sectors, such as aviation and tourism will see a gradual recovery in air passenger volumes and visitor arrivals.
Similarly, consumer-facing sectors, such as retail trade and food services, are expected to benefit from the recovery in visitor arrivals, as well as an improvement in consumer sentiments amidst better labour market conditions.
“However, economic activity in these sectors is not likely to return to pre-COVID-19 levels even by end-2021,” said MTI.
Meanwhile, the construction sector is projected to recover from the low base this year, although construction activity will continue to be dampened by the implementation of safe management measures.
“On balance, given the improved growth outlook for key external economies, as well as a further easing of global travel restrictions and domestic public health measures that is expected in the year ahead, the Singapore economy is projected to return to growth in 2021,” MTI said.
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