Singapore’s Ministry of Trade and Industry (MTI) has revised its growth forecast for the year to -6.5% and -6%, from its previous estimate of a -7% to -5% range.
The move comes as the global economic situation “has remained subdued” with some economies like China expected to see sustained recovery for the rest of the year as the Covid-19 infections in their country remain under control.
"While growth is expected to rebound from the low base this year, our economic recovery is expected to be gradual, with GDP not likely to return to pre-Covid levels until the end of 2021," noted Gabriel Lim, Permanent Secretary for the trade and industry ministry.
"Furthermore, there remains uncertainty over how the Covid-19 situation will evolve globally in the year ahead, which will depend in part on the progress in vaccine development, production and distribution," he added.
Indeed, the wounds brought on by Covid-19 and the resultant circuit breaker measures to curb its spread have had a lasting impact on Singapore’s domestic economy.
The city state’s GDP for 3Q2020 ended September plunged by 5.8% year-on-year, improving sharply from the 7% contraction predicted in advance estimates, the MTI revealed on Nov 23.
The latest showing is also an improvement from the 13.2% year-on-year contraction seen in the previous quarter ended June which stretched across the circuit breaker.
The better performance was heralded by a 10% year-on-year surge in the manufacturing sector that benefitted from a surge in the output of electronics, biomedical manufacturing and precision engineering.
The stronger output for electronics and precision engineering comes on the back of strong global demand for semiconductors and semiconductor equipment. Along with biomedical manufacturing cluster, the three clusters helped offset the drag brought on by transport engineering and general manufacturing.
Growth was also seen in the finance & insurance sector which expanded by 3.2% from the previous year. MTI attributes this to healthy expansions in the banking and insurance segments, presumably as more people took greater interest in financial planning amidst the pandemic.
Similarly, the information & communications sector too benefited from the pandemic-effect which brought resilient demand for enterprise IT solutions. This brought a 2.0% growth to the segment, a turnaround from the 0.8% slowdown seen in the preceding quarter ended June.
Other sectors remained in the red, with the construction sector being the worst hit with a 46.6% plummet.
This follows the stalled operations to public and private sector works as migrant workers – who are make up a large proportion of the sector’s employees - had been issued stay home notices and quarantine orders to stem the massive outbreaks occurring, particularly amongst these employees.
The accommodation and food services followed suit with a 24% year-on-year contraction. This was in response to the plunge in international visitor arrivals and lower sales volumes at restaurants, despite the allowance of in-person dining in.
SEE:Singapore's economy declines a historic 13.2% in 2Q20; 2020 GDP lowered to -7% and -5% : MTI
The business services sector was also bruised by the decline in tourism-related activities and the weakness in the commercial and industrial property space. Collectively, this dragged the segment down by 15.2% from 3Q2019.
Meanwhile, declines were also seen in other services (-8.5%) due to a poorer take up in activities such as arts, entertainment and recreation.
On an external front, sectors such as wholesale & retail trade (-4.3%) and transport and storage (-29.6%) continued to dragged by the effects of Covid-19. The former was affected by weakness in the fuel & chemicals and machinery, equipment & supplies sub-segments.
On the other hand, the latter was hit by the global travel restrictions and the resultant dip in air travel and sea cargo volume.
Speaking at a virtual press conference, trade and industry minister Chan Chun Sing acknowledged that the impact of the pandemic on the economy as a whole and the various sectors has been hard on everyone.
“When news of the virus first broke almost a year ago, few would have imagined we would still be fighting the virus today. Even fewer would have imagined the devastation wrought on economies around the world,” he mused.
“Businesses, big and small, local and foreign; Employers and employees; young and old, have all had to learn and adapt,” he added.
The way Chan sees it, there are four factors affecting the recovery of Singapore’s economy. Of this, he says two – infection rates and an agile workforce are within “our control”.
These factors have been responding positively to the government measures put in place, he notes.
However, Chan points to the geopolitical dynamics between countries such as the US and China as well as the recurring waves of Covid-19 infections, as factors “outside our control”.
“As people grow increasingly fatigued with COVID measures, governments will need to muster greater political will and determination to stem the spread of the virus,” he noted.
He believes that new and more frequent lockdowns will have a knock on effect on global demand which will affect export-oriented economies like Singapore
Looking ahead, MTI notes that the ongoing travel restriction will continue to weigh in on these sectors. The spark to the sector is believed to come from the robust demand for semiconductors from the 5G market, data centres and cloud services, which will boost the performance of the manufacturing.
Meanwhile, consumer-facing sectors such as retail and food services are likely to perform poorer than 2019, due to dampened consumer sentiments and capacity constraints imposed by safe management measures.
To this end, MTI estimates Singapore’s economy will rebound with a growth rate of between 4% and 6% in 2021.
