Market watchers expect Singapore’s economy to expand between 5.0% to 5.9% in 2021, according to findings from the Monetary Authority of Singapore’s (MAS) survey of professional forecasters released on Dec 9.
For the ongoing 4Q2020 ending in December, the 23 economists and analysts polled are looking at a 4.5% year-on-year contraction. As for the full-year, they anticipate a 6.0% contraction, in line with official estimates which point to a 6% to 6.5% shrinkage.
On a sectoral basis, the market watchers are looking at an expansion in sectors such as manufacturing (+5.8%), finance and insurance (+4.6%) and non-oil domestic exports (+4.2%). This comes on the back of the growth registered by these sectors in the 3Q2020 ended September.
Conversely, they are looking at contractions in construction (-36.2%), accommodation and food services (-27.0%) and private consumption (-13.4%), as these sectors have been among the worst hit by the pandemic.
Given these movements, market watchers predict that unemployment will hit 3.7% in 2020, up from the 3.5% predicted in the September survey.
Meanwhile, inflation expectations have moderated since the September survey to -0.3% for headline inflation – the measure of total inflation – and -0.2% for core inflation – the price gauge excluding transport and accommodation.
This is down from the -0.4% for headline and 0.3% for core inflation predicted previously.
Come next year, both metrics are expected to come in at 0.6%, with respondents assigning the highest probability to the 0.5% to 0.9% range.
Against this backdrop, the respondents expect the MAS to strengthen the Singapore Dollar Nominal Effective Exchange Rate (S$NEER) to $1.34 per USD against $1.37 forecast previously.
For now, it is hard say when Singapore’s economy will return to pre-Covid levels given the uncertainty in the global economy.
The tremors of the Covid-19 health-turned-economic crisis – unsurprisingly – topped the list of downside risks identified by the survey respondents. This is as any further waves of coronavirus infections or delays in the development of a vaccine will cause further disruptions to global supply chains, business operations and employment.
Insufficient stimulus was another concern flagged as respondents were weary that an earlier-than-expected pullback in macroeconomic policy support globally may result in a premature tightening in global financial conditions.
Others expressed concern over a possible escalation in trade tensions between the US and China.
On the flipside, the respondents note that a containment of Covid-19 and a resultant re-opening of borders and further fiscal stimulus could boost Singapore’s economic growth.
Additionally, they note that the manufacturing sector is slated to log stronger-than-expected performance due to higher electronics and pharmaceuticals production.
