With the external demands regain momentum, Singapore economy which experienced its worst ever recession in 2020, is poised to rebound with vigor and vitality that it would perform better than expected. However, the recovery would be uneven and “disparate”.
The Monetary Authority of Singapore (MAS) on Wednesday (Apr 28) announced that the country’s gross domestic product (GDP) “could exceed 6 per cent” in 2021 – the upper end of an official forecast range – barring a setback in the global economic recovery or a surge in locally transmitted COVID-19 cases.
Near-term economic prospects have brightened against the strengthening external demand, said the central bank in its latest half-yearly macroeconomic review.
“There are upside risks to growth such as from a stronger-than-anticipated upturn in the global electronics cycle, but these are accompanied by downside risks pertaining to the mutation of the virus and efficacy of vaccination,” it stated.
The Singapore economy contracted by an unprecedented 5.4 per cent following a coronavirus-hit 2020 and it was expected that the economy would recover gradually this year.
Primary data for the first quarter of 2020 indicated that a turnaround after three quarters of contraction, with strong manufacturing activity aiding a 0.2 per cent expansion.
But, the MAS, warned that growth is likely to “remain disparate across sectors”.
“The robust GDP estimate belies continued unevenness in the dispersion of the recovery and is accompanied by elevated uncertainty”.
Robust manufacturing sector
Among the sectors, strong growth is expected for the manufacturing sector, which has been a robust over the past year, as the dynamic turnaround in the global technology cycle continues to boost electronics production.
As opposed to these sectors, prospects for the worst-hit sectors, such as air transport and accommodation, have “deteriorated somewhat” in the context of a global surge in COVID-19 infections and the emergence of more contagious strains.
These negative factors have virtually diminished hopes for a substantial reopening of international borders soon said the central bank.
Across other sectors, construction activities should be assisted by a backlog of projects and an expected leap forward in demand this year would be challenged by factors such as manpower shortages and rising material costs.
However, retail, food and beverage sectors should expect to regain due to improving consumer sentiment, while some modern services segments that performed well during the pandemic may record moderate growth in the coming quarters. These segments include the fund management segment where asset prices could come under pressure due to already-stretched valuations.
Despite, some of the negative factors, Singapore’s economy remains a powerhouse due to its strong and sound fundamentals as well as prudent diversification across diverse sectors.