Singapore revises growth outlook again as Q3 GDP shrinks at slower 5.8% amid COVID-19

The Singapore economy is expected to shrink between 6 % and 6.5 % this year, explained the Ministry of Trade and Industry (MTI) on Monday (Nov 23) in another revision to its 2020 outlook after growth data confirmed a smaller-than-expected contraction in the 3rd quarter.

Its previous estimate, announced in August, was for the economy to contract between 5 %  and 7 % amid the blow from the COVID-19 pandemic.

Policymakers also offered for the very first time a good glimpse of their monetary forecast for 2021 - a good recovery into positive expansion territory, with the economy envisaged to expand between 4 % and 6 per cent next year partly on the back of a minimal base.

For the 3rd quarter, Singapore’s gross domestic product (GDP) contracted by 5.8 per cent on a year-on-year basis, a lot more than halving an archive slump of 13.3 per cent in the previous quarter when the COVID-19 “circuit breaker” was set up.

Compared in a quarter-on-quarter seasonally altered basis, the overall economy rebounded by 9.2 % carrying out a 13.2 per cent decline in the last three months.

Both figures for the 3rd quarter were better than the Government’s advance estimates of a 7 % year-on-year contraction and a 7.9 per cent quarter-on-quarter expansion. 

Apart from a good gradual reopening in June that allowed a good reboot in local financial activities, other main economies also emerged from their lockdowns through the quarter, helping the effectiveness of the Singapore market, MTI said.

Because so many sectors remained in contraction, manufacturing was the glowing spot with a year-on-year expansion of 10 per cent, reversing the prior quarter’s dip of 0.8 %. The “robust” progress was driven generally by the electronics, biomedical manufacturing and precision engineering clusters. 

Other decided on sectors that also authorized growth include finance and insurance, and information and communications. We were holding propped up by healthy progress in the banking and insurance segments, along with resilient demand for enterprise IT solutions, said MTI Permanent Secretary Gabriel Lim at a briefing. 

The economy contracted by 6.5 % on a year-on-year basis over the first three quarters of 2020, explained MTI, noting that the global outlook remains subdued for the others of 2020.

“While some economies like China are expected to see a sustained restoration for the rest of 2020 due to their domestic COVID-19 outbreaks remain under control, others just like the US and Eurozone are experiencing a good resurgence in attacks which might dampen their recovery seeing that restrictions will be reimposed to slow the pass on of the virus,” it explained.

“GRADUAL” RECOVERY IN 2021

MTI expects the Singapore market to come back to growth in 2021 but warned that the restoration would be “gradual”.

The ministry, in its report, said the world’s important economies are expected to recover from the pandemic-induced financial disruptions and visit a rebound in GDP out of this year’s low base. 

But that is “expected to be slow and uneven”, with many economies unlikely to come back to pre-COVID-19 levels before end of the entire year, it added.

Global risks also persist, in accordance to MTI, which cited the periodic resurgence of infections around the world, a protracted nature of a global economic recovery, the probability of a “miscalibration of policy settings” alongside tightening funding conditions, together with geopolitical uncertainties.

Nevertheless, improvements in the exterior growth outlook on the year ahead will probably help trade-related services sectors, such as for example wholesale trade.

Manufacturing, making up one-fifth of the Singapore economy, is set to keep its expansion due to strong semiconductor demand is set to keep carefully the electronics and accuracy engineering clusters going.

Growth in the information and communications, and financing and insurance sectors are actually also likely to remain healthy.

Hard-strike aviation and tourism-related sectors could visit a gradual recovery in air passenger volumes and visitor arrivals, as global travel curbs are steadily eased. Increased visitor arrivals and client sentiment will also support consumer-facing sectors, such as for example retail trade and meals services. 

“However, monetary activity in these sectors isn't likely to return to pre-COVID-19 levels even simply by end-2021,” MTI said.

Over in engineering, the sector is projected to recuperate from the low base this season although activity will continue to be dampened by the implementation of safe and sound management measures. 

“While growth is likely to rebound from the low base this season, our monetary recovery is likely to get gradual, with GDP improbable to come back to pre-COVID levels until the end of 2021,” Mr Lim said.

There remains uncertainty above how the pandemic will evolve globally, based on vaccine development, development and distribution. This will, subsequently, affect the global economy and Singapore’s.

“Domestically, our economical recovery will also rely upon whether we're able to keep carefully the COVID-19 situation under control,” he added. “MTI will continue steadily to monitor developments closely.”

Speaking at a press conference placed following the briefing, Minister designed for Trade and Sector Chan Chun Sing said Singapore still had quite a distance to move in its monetary recovery, even while it were turning the corner.

While the market could see “quantitative” improvements next year, additionally it is vital that you note the “qualitative” changes throughout the market due to the pandemic.

Singapore must adapt to the new simple fact, he added, noting that financial measures can help companies and personnel to pivot to new areas.

UNEMPLOYMENT TO REMAIN ELEVATED

Amid the gradual restoration, the labour market is set to stay “challenging” and unemployment more likely to stay at “elevated amounts”. 

Explaining the Ministry of Manpower’s (MOM) “conservative enjoy” of the labour markets, Mr Kenny Tan, divisional director of manpower planning and policy division for MOM, said employers happen to be set to stay cautious. 

“Some of the employers this season are holding on to surplus manpower through various support schemes, and also because in addition they want to retain their capacities. So in the years ahead next year, they would utilize the existing manpower even more intensively, rather than commit to growing their workforce,” he advised reporters.

“Some will of training do so but we expect that they will look at the uncertainty, and perhaps be more conservative in hiring.”

Asked about financial policy, Mr Edward Robinson, the Monetary Authority of Singapore’s (MAS) deputy handling director, said the central bank’s stance is always unchanged. 

The central bank’s decision previous month to keep up a zero rate of appreciation because of its exchange rate-based monetary policy has “already considered a plausible set of alternative scenarios or outcomes for further projections,” he added.

The MAS could have its subsequent monetary policy meeting and decision in April 2021 as scheduled. 

Separately, authorities as well revised upwards the projections for trade this season amid better-than-expected performance for goods such as for example non-monetary gold and specialised machinery, together with electronics.

Government agency Business Singapore now sees total products trade for 2020 to contract at a slower pace of 7 to 7.5 %, when compared to previously expected decline of between 8 and 10 %.

Non-oil domestic exports (NODX) can be projected to grow between 4 and 4.5 %, higher than the prior range of three to five 5 % growth. 

For 2021, total merchandise trade is expected to grow by 1 to 3 %, while NODX will go up by 0 to 2 %.