Leaving an exhausting year behind

A French cartoon of a bedraggled man arriving at a clinic to take a Covid-19 vaccine has been making its rounds online. The man says, “I am here for a fifth shot because of a third wave. Or vice versa”.

His perplexion comes as France grapples with what seems to be its fifth wave of the pandemic, no thanks to first the Delta variant then the Omicron strain. The image resonates widely as an accurate depiction of the sheer fatigue, anguish and restlessness many have felt for the two years that Covid-19 has been around.

Similar sentiments are shared here, as safe distancing measures and mask-wearing became the norm. “I am so tired from following all the restrictions,” laments 27-year-old teacher Khoo Pei Yee, who has to take weekly ART (antigen rapid test) tests. She is also frustrated at not being able to stick new thumbtacks on a world map tracing her overseas escapades. “I really hope Covid goes away so we can go back to doing things like we used to, without any restrictions,” she tells The Edge Singapore.

Like Khoo, Maggie Teo has been feeling a sense of endlessness. The 68-year-old, who lives alone, has not stepped out of her house in over six months. Teo, who fears infection, has chronic asthma. While she can buy her daily necessities online, she misses hosting her relatives. “It has been months since I saw all of them together and it really pains me,” she mulls. “I understand the need for the safe distancing measures, but I am just longing for the day that Covid becomes a memory of the past”.

A joint study conducted by the Institute of Mental Health (IMH) and the University of Hong Kong between May 2020 till June this year indicates around 13% of the 1,000 respondents reported symptoms of anxiety or depression during the pandemic. The key reasons cited include the risk of family or friends getting infected and financial loss from losing work opportunities or having to take unpaid leave and unemployment. 

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Return to normalcy

Like many Singaporeans and people around the world, Khoo and Teo were looking forward to a return to normalcy this year. Hopes on the easing of restrictions were raised towards the end of 2020 after the daily Covid-19 case count dropped to low single digits. Along with the vaccine roll-outs, many were expecting a resumption of social activities and international travel.

Earlier this year, Singapore was even ranked tops in Bloomberg’s April Covid-19 Resilience Ranking which lists the best and worst places to be in during the pandemic. The ranking takes into account local transmission and vaccine roll-out rates.

Alas, this rosy backdrop soon changed amid a pickup in infections and the debut of the more chronic Delta variant. Singapore went into a phase of Heightened Alert (HA) for several months as daily cases surpassed the four-digit mark. The restrictions imposed ranged from a complete ban on dining-in to being able to have social gatherings of up to two persons and up to five more recently.

See also: MAS set to hold monetary policy as inflation persists

These developments eventually pushed Singapore’s Bloomberg ranking down to 37 in November. However, there were bigger concerns to deal with: A build-up of frustration among residents and businesses because of the start-stop curbs around work and social interactions where safe management measures were eased before being re-tightened, sometimes in a matter of weeks.

Fredrick Tay, who owns an interior design consultancy, says he had “great difficulty” rescheduling and fitting in appointments with his clients each time the safe management measures were re-introduced. Virtual meetings are not ideal as his clients need to see and feel the texture of the fixtures and fittings. He could see only two clients a day during the HA phase. “We really had to re-jig our meetings each time the restrictions were changed due to the caps on how many people could be in the office,” says Tay.

The curbs have frustrated Singapore’s large expat community — many of whom moved here for easy access to capital and proximity to Asean markets. Some could not comprehend why the restrictions here were stiffer than what they had in their home countries, even though the  city-state had a higher inoculation rate. As of Nov 30, 91.9% of Singapore’s total population had been fully vaccinated. In comparison, the vaccination rate in developing Asia stood at 48.7%, while that in the United States and the European Union were 58.1% and 67.2% respectively.

“Well there certainly was a lot of getting used to,” says Chris, an investment professional who hails from the US. He says things in his home country are a lot more relaxed — with mask-wearing being restricted to the more populous cities. During a recent trip to his hometown of Chicago, a group of people even came up to him and asked him to remove his mask because it was “making them feel uncomfortable”, chuckles Chris.

Stronger economy

Even as Singaporeans cope with a sense of endlessness and fatigue brought on by the long-drawn pandemic, there are some reasons for cheer as economists expect the rebound in the Singapore economy to continue. Official estimates put 2021’s expansion at about 7% and the republic is already on track to achieve this, thanks to a 7.1% y-o-y expansion in the most recent 3Q2021. Prior to this, the GDP was up by 1.5% in 1Q2021 and 14.7% in 2Q2021.

What is more significant is that stronger economic growth was registered even though the tighter restrictions lasted for more days this year than in 2020, reflects BofA economist Mohammad Faiz Nagutha. He attributes the resilience to a strong manufacturing sector that remained operational with no impact on capacity.

However, it is a different picture in neighbouring economies. For example, prolonged factory shutdowns in Vietnam between July and August affected contract manufacturers for brands such as Adidas and Puma. Similarly, plants in Malaysia servicing the semiconductor industry were somewhat affected too, contributing to the production curbs faced by car makers such as Toyota and General Motors.

Manufacturing and labour sectors

For the most recent 3Q2021, Singapore’s manufacturing sector grew by 7.2% y-o-y, which is a significant deceleration from 2Q2021’s 17.9%. Nevertheless, this growth rate, underpinned by robust global demand, is still considered healthy.

Nagutha notes that the services cluster has also been a strong growth driver. Key contributors include financial services, which grew 9% y-o-y in 3Q2021. The information and communications sector rose 10.4% in the same quarter, thanks to strong demand for enterprise IT solutions.

Meanwhile, Singapore’s labour market is seeing a recovery too. Both income and employment rates have gone up. The overall employment rate of residents aged 15 and above rose to 67.2% in June, compared to 64.5% a year ago. This is higher than the pre-pandemic level of 65.2% seen in June 2019. 

This year, income has recovered to pre-Covid-19 levels, a turnaround from 2020 when it took a hit for the first time in 16 years. The nominal median income of full-time employed residents — including CPF (central provident fund) contributions — grew by 3.2% in June. This is a turnaround from the 0.6% decline seen in the previous year. 

2022: A year of reopening

Singapore’s “robust” economic performance in 3Q2021 has pushed the Asian Development Bank (ADB) to upgrade its 2021 growth forecast from 6.1% to 6.9%. It expects the republic to post “solid recovery in line with an improved global economy as well as the government’s effective efforts to manage Covid-19 and revive the economy”.

In the coming 2022, Singapore’s GDP growth is seen to continue with a 4% consensus estimate by 22 economists surveyed by the Monetary Authority of Singapore (MAS). They point out that a reopening of borders to international travel as well as faster-than-expected global growth — possibly driven by capex and trade — could provide a further boost to Singapore’s economic growth. Thus far, Singapore has 27 so-called Vaccinated Travel Lane (VTL) agreements in place including Malaysia, US and UK.

“With the economy reopening and expansion of VTLs, consumer-facing and travel-related sectors like F&B, retail, recreation and hospitality will catch up and recover more strongly in 2022,” says Maybank Kim Eng’s senior economist Chua Hak Bin. He adds that the relaxation of border controls will also help ease foreign worker shortages, even as the construction sector’s output may remain below pandemic levels in 2022.

Looking ahead, Chua notes that the Singapore economy is undergoing a restructuring and transformation process to be more resilient. The adoption of left-leaning policy changes could see the economy having a “higher wage, higher cost” structure. Together with tighter foreign manpower and immigration policies as well as minimum salaries and an expansion of the progressive wage model, Chua sees a significant rise in labour wage costs. He also sees investments flowing into higher labour productive sectors and less labour-intensive sectors like high-end manufacturing, financial services and infocomm.

Meanwhile, MAS’s survey flagged three concerns: further waves of Covid-19 infections, slowing growth in China and a faster-than-expected tightening in monetary policy by central banks arising possibly from a larger-than-expected pickup in inflation levels. 

Spectre of inflation

Inflation has been a major cause of concern globally. Nagutha, for one, is betting on inflation levels in Asean rising to a 10-year high of 2.7% in 2022, from 2.2% this year. The way he sees it, global energy prices and sticky prices of food will tip the price gauge upwards. In this vein, he expects all central banks in Asean to begin their policy normalisation process. Even as the MAS has already begun that process, Nagutha has pencilled a further 50 basis point increase in the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) policy slope to 1.0% in April as core inflation moves higher. An even steeper slope of 1.5% is likely if inflation continues to surprise on the upside, he adds.

As 2021 draws to a close, the good news is that Singapore’s economy is seemingly out of the doldrums.

However, it is possible for things to swing in the other direction if new Covid-19 strains beyond Omicron emerge. The government has already indicated that residents would soon need to have had three shots to be considered fully vaccinated. For now, there is no guarantee we will not have to be vaccinated beyond the third shot — just like in the French cartoon. 

Cover image: The Edge Singapore