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Singapore economy tipped to grow 5.5% next year; vaccines could push growth higher

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SINGAPORE – Singapore’s economy will grow by 5.5 per cent in 2021 to end the nation’s worst recession ever, induced by the coronavirus pandemic, according to a central bank survey of professional forecasters.

The pace of growth can be even higher if the pandemic is contained by a successful deployment of vaccines worldwide, they said.

The prediction made by 23 economists and analysts in the Monetary Authority of Singapore (MAS) quarterly survey was unchanged from the previous forecast made in September.

However, their forecast range for 2021 growth narrowed to 5 per cent to 5.9 per cent from 4 per cent to 5.9 per cent, the MAS survey report released on Wednesday (Dec 9) showed.

The private forecast comes after the Ministry of Trade and Industry (MTI) in November forecast growth rebounding by 4 per cent to 6 per cent in 2021 – the most since at least 2011 when the economy expanded by 6.3 per cent.

For 2020, the private forecasters expect gross domestic product (GDP) to decline by 6 per cent, also unchanged from the previous survey. That compares to MTI’s forecast of a 6.5 per cent to 6 per cent contraction in 2020.

The economists also expect GDP to shrink by 4.5 per cent year on year in the fourth quarter of this year, after contracting by 5.8 per cent in the September to October period – a smaller decline than their forecast of a 7.6 per cent drop in the previous survey.

For the jobs market, they expect the unemployment rate to reach 3.7 per cent at the end of 2020, up from their estimate of 3.5 per cent in the previous survey.

Inflation as measured by the consumer price index and the MAS core inflation in the fourth quarter of this year are expected to come in at minus 0.3 per cent and minus 0.2 per cent respectively.

Three-quarters of the respondents in the MAS survey expect private residential property prices to pick up in the October to December period compared with the previous quarter, while the rest believe these will remain stable.

Looking ahead, the containment of the pandemic, attributable primarily to the widespread global deployment of a vaccine, again emerged as the most frequently cited upside risk to Singapore’s growth outlook – with 77.8 per cent ranking it as the top upside risk.

The prospect of reopening borders to international travel was seen as a potential upside by 44.4 per cent of the respondents who also identified stronger-than-expected manufacturing sector performance led by electronics and pharmaceuticals production, as well as fiscal stimulus, in support of Singapore’s recovery.

On the downside, a further deterioration in the Covid-19 situation – due to new outbreaks or delays in vaccine development – once again topped the list of downside risks to Singapore’s growth outlook in the survey.

The threat was identified by 88.9 per cent of survey respondents and 72.2 per cent of them ranked it as the most important downside risk.

The economists were also concerned about risks stemming from an earlier-than-expected pullback in macroeconomic policy support globally, resulting in a premature tightening in global financial conditions and weaker demand due to fiscal consolidation.

This risk was identified by 44.4 per cent of respondents, up from 20 per cent in the previous survey.

An escalation in United States-China tensions was identified by 27.8 per cent as a downside risk, compared with 60 per cent in the previous survey.

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