Following the return to Phase 2 (Heightened Alert) measures announced by the Singapore government on July 20, economists have kept their GDP forecasts unchanged for now, albeit cautiously.
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Bank of America (BofA) has kept its Singapore GDP growth forecast for 2021 unchanged at 7.5%, though it highlights that risks are skewed to the downside. "We see downside risks to near-term growth of around 0.5 percentage points," it says in a July 21 research note.
The brokerage notes that the measures will impact consumer-facing sectors the most, though this may be offset by stronger contributions from the manufacturing and modern services sectors. “Furthermore, the size of the likely rebound once the outbreak is under control depends on the government's reopening plans, which are not clear to us,” BofA adds.
BofA also mulls on the potential delays the government’s latest shift in focus towards vaccination rates among the elderly could cause for the transition to managing Covid-19 as an endemic disease. “While the overall direction is unlikely to abruptly change, any significant delays would have an impact on our 2021-22 outlook,” the brokerage cautions.
OCBC Bank’s treasury research team is similarly cautious on the measures. “This presents another setback for the 2H recovery and probably warrants some extension of support measures for the affected industries,” the team says.
OCBC Bank believes that a larger FY2021 deficit may be “reasonable to expect”, and foresees full-year GDP growth coming in “a shade below” 7%, though this will be highly dependent on the pickup in vaccination rates and the frequency and duration of any further bouts of restriction tightening.
At RHB Group Research, economists have kept their GDP forecast at 5.8%, which is lower than consensus. “Despite the progressive vaccination rollout, the prospects of a re-introduction of restrictions remain forthcoming, both domestically and externally, due to the potential risk of a further spread of the virus within the community,” they say.
Meanwhile, UOB economist Barnabas Gan takes a more upbeat view on the impact of the tightened measures, seeing it as a “minor setback”. He highlights that the previous Phase (HA) during May to June “did little to dent Singapore’s growth prognosis” and is confident that the measures will be effective in curbing the spread of Covid-19 cases in 3Q2021.
In the meantime, he believes that Singapore’s growth in exports and industrial production will sustain the economy’s recovery. “While Phase 2 (HA) will likely impact the services sector, especially the food & beverage and retail industries, Singapore’s externally-facing sectors should remain relatively unscathed,” he reasons.
To that end, he has kept his GDP growth forecast, which stands at 6.5% for 2021, pending further clarity on how the Covid-19 situation will evolve.
Photo: Bloomberg
