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Tue, November 24, 2020 – 5:50 am
Singapore
Singapore’s economy is leaning to recover sharply next year, on the low base of the ongoing recession.
But even with Covid-19 vaccines on the horizon, politicians and lawmakers here have nullified hopes for a miracle cure, as global uncertainty related to the virus still stalks recovery.
While gross domestic product (GDP) is forecast to grow between 4% and 6% year-on-year in 2021, it will still be weaker in dollar terms than before the novel coronavirus hit.
That’s even as the Ministry of Commerce and Industry (MTI) cut this year’s forecast range on Monday to 6% to 6.5%, from 5% to 7% earlier.
The revision assumes a recovery at the end of the year, as the economy contracted 6.5 percent in the first nine months.
Trade and Industry Minister Chan Chun Sing warned in a briefing that vaccine development cannot be a “quick fix” as production and deployment “will take many months, if not years.”
Such caution contrasts with private sector optimism about recent progress in vaccine candidates being developed by pharmacists such as Pfizer, Moderna and AstraZeneca.
Barclays economist Brian Tan suggested that a short-term deployment of vaccines in developed markets will boost external demand for Singapore’s “relatively resilient” exports and factory output, while Maybank analysts Kim Eng, Chua Hak Bin and Lee Ju Ye pointed to the potential increase in the export of services and travel and hospitality.
However, the MTI noted “uncertainty about how the Covid-19 situation will evolve globally in the next year”, including the vaccination process.
“While growth is expected to rebound from this year’s low base, our economic recovery is expected to be gradual, and GDP is not likely to return to pre-Covid levels until the end of 2021,” the secretary said. Permanent Trade and Industry, Gabriel Lim. .
Standard Chartered economists Edward Lee and Jonathan Koh agreed that next year’s economic activity will remain lower than the pre-Covid mark in 2019, as “the actual widespread application of a successful vaccine appears likely only in the second half of 2021 “.
Singapore’s GDP contracted 5.8 percent year-on-year in the third quarter, beating official advance estimates of a 7 percent decline on better-than-expected factory output in September.
Irvin Seah, Senior Economist at DBS, said: “Growth figures in the first half of next year will be very volatile, due to base effects this year.
“However, the growth performance will be well above potential as the recovery gains momentum in the second half of next year, assuming vaccines will be available and global travel can safely resume.”
The latest print was led by a 10 percent expansion in the manufacturing sector, above anticipated estimates of 2 percent growth and reversing a previous 0.8 percent decline.
Still, service industries contracted 8.4 percent year-on-year in the quarter, slightly worse than the preliminary figure of an 8 percent contraction, while the decline in construction was revised to 46.6 percent. percent, versus 44.7 percent for flash data. .
The construction sector, as well as travel-related and consumer-oriented services, are expected to recover year-over-year in 2021, but remain below pre-Covid-19 levels, the MTI said.
Meanwhile, Citi analysts Kit Wei Zheng and Ang Kai Wei cited medicine-related manufacturing exports and strong investment commitments as some bright spots for growth in 2021.
But they also suggested that the reopening of construction could be offset by a decline in domestic and external consumer demand, as well as slower growth in semiconductors.
“Labor market slack will continue to be large and will likely affect consumer-oriented sectors,” they added on a quick note.
In fact, Kenny Tan, who heads the Labor Planning and Policy division of the Ministry of Manpower, said that labor market conditions are expected to be “somewhat challenging”, with unemployment above average levels. 3 percent observed in the last five years.
Even with an economic rebound, “we are conservative because the employers themselves will be conservative.”
Said Mr. Tan: “Some of the employers, this year, are holding on to excess labor, in a sense … They will use the existing labor perhaps more intensively, rather than commit to expanding their workforce. labor force”.
Still, just days after postponement of unquarantine travel with virus-stricken Hong Kong, Chan said Singapore has the resources and plans to further reopen its borders.
The government will allow more business trips out of Singapore and will resume “bringing in the necessary professionals and workers.”
“We will also be able to progressively organize larger Mice events to maintain our position as a leading business node,” Chan added, referring to meetings, incentives, conferences and exhibitions.
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