SINGAPORE – Singapore upgraded its economic growth forecast range for 2021 to 6 per cent to 7 per cent, in view of the better-than-expected performance of its economy in the first half of the year and as Covid-19 vaccination rates gain pace in key advanced economies and at home.
The new prediction compares with the previous official growth forecast of 4 per cent to 6 per cent, made first in November last year and maintained in May.
The Ministry of Trade and Industry (MTI), which announced the forecast, said that while Covid-19 cases continue to be on the rise globally due to the spread of the highly transmissible Delta variant, vaccination rates have also picked up in key advanced economies such as the United States and the eurozone, which have in turn allowed them to press on with their reopening plans.
In contrast, regional economies, which have been slow to vaccinate their populations, have had to reimpose restriction measures to curb a resurgence in infections. This has in turn dampened their growth outlook, MTI said.
“On balance, the recovery in external demand for Singapore for the rest of the year remains largely on track,” the ministry noted.
Enterprise Singapore, meanwhile, hiked its 2021 trade forecasts amid the Republic’s better-than-expected second-quarter growth – particularly in electronics, specialised machinery and petrochemicals – and higher expected oil prices that support the oil trade.
Non-oil domestic exports (Nodx) are now tipped to grow 7 per cent to 8 per cent, up from the 1 per cent to 3 per cent previously forecast. Total merchandise trade is predicted to increase by 13 per cent to 14 per cent, much higher than the previous forecast of 5 per cent to 7 per cent growth.
This comes after Nodx grew by 10.1 per cent in the second quarter, following the 9.7 per cent rise in the first quarter, driven by increases in both electronics and non-electronics shipments.
At home, Singapore began easing some of its Covid-19-related curbs this week, allowing dining in to resume and raising group sizes to five for those who have been fully vaccinated. Work-from-home rules are expected to ease next week.
The easing of restrictions come as Singapore announced that 70 per cent of its population has been fully vaccinated, and 79 per cent have received at least one dose.
Mr Gabriel Lim, Permanent Secretary for Trade and Industry, said the progressive easing of domestic and border restrictions amid rising vaccination rates in Singapore will also help to support the recovery of consumer-facing sectors and alleviate labour shortages in sectors that are reliant on migrant workers, such as construction and marine engineering.
However, the recovery will remain uneven, with tourism- and aviation-related sectors projected to recover more slowly than previously expected.
“Even though domestic border restrictions may be eased towards the later part of the year, demand is not expected to return quickly as travel restrictions globally are likely to be lifted cautiously,” said Mr Lim.
The bulk of growth will still come from outward-oriented sectors such as manufacturing and wholesale trade, he said.
“In particular, the manufacturing sector is projected to see robust growth due to strong semiconductor and semiconductor equipment demand.”
Some help will be forthcoming from consumer-facing sectors such as retail, and food and beverage service, as the restrictions are eased over the course of the year, and as consumer sentiments improve in tandem with better labour market conditions.
Mr Kenny Tan, director at the Ministry of Manpower, said unemployment rates are likely to improve through the rest of the year, although employment recovery may remain uneven across sectors with mismatches in the labour market.
Mr Edward Robinson, the Monetary Authority of Singapore’s (MAS) deputy managing director and chief economist, said the central bank’s current policy stance of zero appreciation of the trade-weighted Singapore dollar remains appropriate.
However, MAS will continue to watch global developments, he added. The central bank’s next scheduled policy review is in October.
According to MTI, the Singapore economy expanded by 14.7 per cent on a year-on-year basis in the second quarter of this year, faster than the 1.5 per cent growth in the previous quarter.
For the first half of the year, growth came at a better-than-expected 7.7 per cent.
The strong second-quarter growth was largely due to the low base in the same period last year when gross domestic product (GDP) fell by 13.3 per cent as a result of the circuit breaker measures implemented from April 7 to June 1, 2020, as well as the sharp fall in external demand amid the Covid-19 pandemic.
In absolute terms, GDP remained 0.6 per cent below its pre-pandemic level in the second quarter of 2019, MTI said.
On a quarter-on-quarter seasonally adjusted basis, the Singapore economy contracted by 1.8 per cent in the second quarter of this year a reversal from the 3.3 per cent expansion in the first quarter.
Growth in the quarter was led by the manufacturing sector, which expanded by 17.7 per cent year on year, extending the 11.4 per cent growth recorded in the previous quarter.
The construction sector grew by 106.2 per cent year on year, a sharp turnaround from the 23.2 per cent contraction in the previous quarter, as both public and private sector construction works expanded.
The wholesale trade sector expanded by 2.9 per cent year on year, easing from the 3.5 per cent growth in the previous quarter.
The retail trade sector expanded by 50.7 per cent year on year, accelerating from the 1.6 per cent growth in the previous quarter. The transportation & storage sector grew by 20.9 per cent year on year, a turnaround from the 15.8 per cent contraction in the preceding quarter.
The information and communications sector expanded by 9.6 per cent year on year, a step up from the 6.8 per cent growth in the previous quarter.
The real estate sector grew 25.8 per cent year on year, a turnaround from the 3.1 per cent contraction in the previous quarter. The accommodation sector expanded by 13.2 per cent year on year, easing from the 16.3 per cent growth in the preceding quarter.
The food and beverage service sector expanded by 36.7 per cent year on year, a turnaround from the 9.2 per cent contraction in the previous quarter.