UOB economist Barnabas Gan says he still expects a K-shaped recovery in Singapore, and that the return to Phase 2 measures is likely to have little impact on Singapore's GDP growth in 2021.
“This is due to two reasons: [first], there are no restrictions on business operations (except for the closure of gyms and dine-in services restriction of up to 5 persons), while [second], the return to Phase 2 will last for merely three weeks,” he writes in a macro note dated May 5.
Gan’s remarks come after Singapore returns to Phase 2 measures as the multi-ministry task force tightens social restriction measures. The measures will take place from May 8 to May 30.
See: Tighter anti Covid-19 measures to curb further rise in cases
Nevertheless, the services and food and beverage (F&B) sectors could see a negative knock-on effect in the near-term, in light of entry restrictions, the reduction in group size for gatherings, and a lower proportion of Singapore’s workforce allowed in workplaces, notes Gan.
“Outward-facing industries are expected to perform well on the back of global growth recovery, [while] the construction and services industries may continue to see headwinds on Covid-19 risks,” he says.
See also: Resumption of 'Phase 2' measures unlikely to be a substantial drag on economy: Barclays
“The Monetary Authority of Singapore (MAS) had previously commented that Singapore will likely exceed the upper end of the official 4–6% forecast range, barring a setback to the global economy. This compares to our outlook for GDP growth to average 5.5% in 2021,” he adds.
Looking at Singapore’s economic performance year-to-date (y-t-d), Gan notes that Singapore’s growth momentum has “clearly improved from a Covid-19-induced recession in 2020”.
“High-frequency data such as manufacturing and NODX supports the positive outlook.”
However, should the number of Covid-19 cases rise to levels seen in 1H2020, Singapore could well return to its circuit breaker measures.
“Should that come to pass, economic momentum will inevitably be dragged by renewed weakness in the services and construction sectors, coupled with headwinds against Singapore’s tourism sector,” says Gan.
“Depending on the duration of another circuit breaker, such a scenario could see Singapore revisiting the prospect of a GDP contraction in 2021,” he notes.
In the same report, Gan highlighted that Singapore’s GDP contracted 5.4% in 2020, accounting for a 13.3% decline y-o-y in 2Q2020 alone.
