DBS economist Irvin Seah has revised his full year growth forecast for Singapore in 2020 to -6.0%, up from -6.5% previously, in anticipation of an economy on the mend and recovery in some regional markets.
See: Rebound in Singapore's economy likely to take longer than previous recessions: MAS
“The Covid-19 situation has stabilised and prompted the government to implement phased opening of the economy,” he writes in a report dated Oct 28.
As at Oct 25, Singapore’s infection curve has flattened significantly since August after the completion of mass testing of construction workers. The number of new daily cases has also dropped considerably while fatalities remain low.
Workplace and transit activities in Singapore have since recovered amid the phased reopening of Singapore.
The country also expects to transition into Phase 3 by the end of 2020.
See also: Phase 3 might start by end of the year
To that end, Seah expects an upward revision of headline GDP growth for 3Q2020 to -5.4% y-o-y in 3Q2020 from the 13.3% contraction in 2Q2020.
Yet, he says, the recovery will remain uneven and growth performance across sectors will “differ considerably”.
Segmentally, Seah estimates contractions from 4.6% to 34.0% in the wholesale and retail sector, business and transport services, construction, and hotels and restaurants. He also foresees growth of 1.4% to 7.5% in the information and communications, manufacturing and financial services sectors.
The tourism sector, which has been badly hit by the pandemic, has continued to struggle. Likewise, the services sector is also expected to remain a drag on growth and employment.
Exports and industrial production (IP) are recovering strongly, which will prompt an upward revision in 3Q2020 GDP figures.
Seah also cites the turnaround in the global electronics cycle as another positive catalyst for the Singapore manufacturing sector.
He adds that inflation has bounced back to zero in September 2020 but will likely remain negative for the full year due to the negative output gap and counter-cyclical fiscal measures.
Barring further weakness in the USD, Seah says the USD/SGD may have found a base around 1.36 after the last SGD policy review on Oct 14.
“SIBOR, SOR and SORA will be held low for the foreseeable future as the Fed keeps to ultra-loose monetary policy through 2021,” he says.
