Singapore’s economy had ended 2020 with a 5.4% contraction, well within the -5% to -7% range predicted in official estimates.
This follows a 2.4% y-o-y contraction in the fourth and last quarter of the year, an improvement from the 5.8% decline logged in the previous quarter ended in September 2020, the Ministry of Trade and Industry (MTI) revealed on Feb 15.
While most sectors remained in the red, some bright spots were already evident. The manufacturing sector was one such industry which grew by 10.3% y-o-y, thereby extending the 11% expansion it had logged in 3Q2020.
This follows stronger performance in its electronics, biomedical manufacturing, precision engineering and chemicals clusters, which offset output declines in its transport engineering and general manufacturing arms.
The finance and insurance sector followed suit with a 4.9% y-o-y growth, better that the 4.2% expansion achieved in 3Q2020. This was supported in part by healthy expansions in its banking and insurance segments, MTI indicates.
In the same vein, growth in the information and communications sector came in at 2.6% y-o-y, faster than the 1.4% recorded in the third quarter of 2020. This was led by the IT & information services segment which continued to see the resilient demand for IT solutions from enterprises.
A growth of 1.8% was also seen in the wholesale trade sector. With this, it has reversed into the green from its 5.0% contraction in 3Q2020. This was driven by better performance in the machinery, equipment & supplies segment which benefitted from the strong performance of the wholesalers of telecommunications equipment and computers.
Meanwhile, contractions were seen in the other industries, with the largest being the construction and transport engineering sectors which were both down by 27.4% each y-o-y.
While an improvement from the 52.5% low in 3Q2020, the construction sector’s performance follows declines in works in both the public and private sectors.
The performance of transport engineering had also edged up from the 29.0% fall in 3Q2020 with a major drag coming from the air transport segment which has continued to take a hit from slump in air passengers handled at Changi Airport as travel has somewhat grounded to a halt.
The water transport also contracted as the volume of sea cargo handled fell, MTI adds.
Also affected by lower travellers was the accommodation sector which was down by 19.7% y-o-y – extending the 20.5% decline in 3Q2020.
Conversely, the food and beverage services sector shrank by 19.0% y-o-y, improving from the 24.1% contraction in 3Q2020. Declines were seen in all segments within the sector, in part due to the capacity constraints imposed under the safe distancing measures.
On the other hand, the real estate sector’s growth was down by 10.8% y-o-y. This follows the 17.7% drop in 3Q2020 and comes largely due to sluggish rentals in the commercial and industrial property markets.
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Other sectors that remained in the red were administrative and support services (-14.9% y-o-y), professional services (-7.5% y-o-y) and other service industries (-5.7% y-o-y).
For the administrative and support services sector this came from a shrinkage in its rental and leasing of construction machinery and equipment and air transport equipment. The other administrative and support services segment was dragged by poor performance of travel agencies, tour operators and MICE organisers.
The professional services sector was meanwhile dragged by steep declines in the architectural and engineering, technical testing and analysis segments due to sustained weak demand from the construction sector.
As for the other services industries, it was weighed down by segments such as arts, entertainment and recreation which had slumped due to lower visitor arrivals as well as the implementation of public health measures.
Given the improvement in Singapore’s economic performance in 4Q2020, MTI is looking at a gradual recovery with growth averaging between 4% and 6% in 2021.
Although the speed of vaccine deployment varies, advanced economies like the US and Eurozone are expected to reach population immunity by the second half of this year, which should in turn spur their economic recoveries, mulls Gabriel Lim, permanent secretary for trade and industry.
However, he cautions that significant uncertainties remain in the global economy.
“A key uncertainty pertains to the course of the pandemic and the trajectory of the global economic recovery. How these pan out in the year ahead depends on factors such as the adequacy of vaccine supplies, the speed of vaccine deployment, the possible emergence and spread of new strains of the virus, among others,” he adds in a virtual press conference on Feb 15.
Still, Lim sees some green shoots in some sectors. For instance, the outward-oriented sectors such as manufacturing and wholesale trade are projected to benefit from the pickup in external demand, he says.
However, tourism-and aviation-related sectors are “not expected to return to pre-Covid levels even by the end of the year”, says Lim.
The sectors are likely to see a weaker recovery than previously expected due to the slower-than-anticipated lifting of global travel restrictions, as well as sluggish travel demand, he adds.
The lower visitor arrivals and capacity caps will also affect the consumer-facing sectors such as food and beverages, says Lim.
A slow recovery will also be seen in the construction and marine and offshore engineering sectors, he adds.
