Photographer: Lauryn Ishak / Bloomberg
Photographer: Lauryn Ishak / Bloomberg
Singapore reaffirmed its forecast of a recovery in economic growth this year, after the worst annual contraction since independence, signaling that the recovery is on track, while more stimuli expected in this week’s annual budget presentation will provide more support.
The Ministry of Commerce and Industry on Monday maintained its projection of growth in a range of 4% to 6% for 2021, seeing a faster launch of the vaccine in advanced economies, while the USA and Europe could achieve population immunity in the second half of the year. These gains can be offset by a darker regional outlook with the resurgence of the virus in some countries.
“The recovery is expected to gain momentum in the second half of the year, assuming vaccines become more readily available and global travel can gradually resume after that,” said Irvin Seah, economist at DBS Bank Ltd. in Singapore. “Overall, the economy is recovering, but the pace of growth will remain lukewarm and uneven.”
Looking up
Singapore recovering from worst contraction since independence
Source: Singapore Department of Statistics, Ministry of Commerce and Industry
The Singapore dollar rose 0.1% to 1.3233 per US dollar as of 11:12 am local time.
Trade-dependent Singapore took a beating last year, shrinking 5.4%, said MTI, reviewing its preliminary report last month’s estimate of 5.8% contraction. The aviation, transportation and hospitality sectors suffered from the paralysis of tourism and mobility restrictions – and are expected to remain weak this year, Gabriel Lim, the ministry’s permanent secretary, told reporters on Monday – while financial and professional services were more resistant during blockage and consequences.
“There have been upward revisions in all sectors, especially in construction and services,” Khoon Goh, Asia’s head of research in Australia and New Zealand Banking Group in Singapore said about the gross domestic product report. However, he noticed, the data has “little implications for monetary policy” and he expects the Singapore Monetary Authority to remain on hold throughout the year.
Budget due
Monetary authority, whose exchange rate is the main policy tool, stated that it maintains appropriate and unchanged, Deputy Managing Director Edward Robinson told reporters on Monday. MAS’s next scheduled political decision is in April.
What the Bloomberg economy says …
“The year-on-year decline in Singapore’s economy in the 4Q has decreased much more than initially estimated. Without a significant acceleration in activity in the second half of the 1Q, however, we still expect the contraction to extend until 1Q 2021 ”.
– Tamara Mast Henderson, economist at Asean
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Daily cases of viruses transmitted locally in Singapore have hovered close to zero in recent weeks, encouraging plans to receive more visitors this year under various security deals, while others in the region, including Indonesia and Malaysia is battling waves that are exacerbating its economic pain.
Read more: Singapore sees people traveling this year with the launch of vaccines
“Singapore’s semiconductor sector is at a very good point,” and an acceleration in construction activity could help boost the goods sectors in the coming months, said Song Seng Wun, economist at CIMB Private Banking in Singapore. “As modern services are also expected to perform even better this year, I am crossing my fingers so that there can be a positive surprise” for the government’s growth forecast.
Economists in a Bloomberg survey predict that Finance Minister Heng Swee Keat will announce another fiscal deficit by revealing details of the next financial year budget on Tuesday, which should include targeted support for vulnerable families and businesses.
Read more: Singapore will reduce budget deficit to 4% of GDP in FY21: research
The Singapore government said last week that its five stimulus packages announced in 2020, along with a loose monetary policy, saved the economy from a contraction of 12.4% or more last year.
Other details
- The ministry also released the final economic estimates for the fourth quarter, which showed non-annualized and seasonally adjusted GDP growth of 3.8% over the previous three months, better than the estimated 2.4% and the previous projection of 2 ,1%. Dropped 2.4% over the previous year, better than the expected 3.6% retraction
- Manufacturing contracted 1.4% in the fourth quarter compared to the previous three months, services grew 4.1% and construction grew 55.6%
- In a separate report on Monday, Enterprise Singapore said it sees growth in non-oil exports ranging from 0% to 2% in 2021, after having increased 4.3% in 2020
- Inflation may increase in the second quarter based on statistical effects, said MAS
– With the help of Chester Yung, Myungshin Cho and Tomoko Sato
(Adds analyst comments in the third and ninth paragraphs, updates the currency level.)