Photographer: Lauryn Ishak / Bloomberg
Photographer: Lauryn Ishak / Bloomberg
Singapore reaffirmed its forecast for a return to economic growth this year after the worst annual contraction since independence, signaling that the recovery is on track, while more incentives expected in this week’s annual budget presentation will provide additional support.
The Ministry of Trade and Industry maintained its growth forecast of 4% to 6% for 2021 on Monday, noting a faster launch of the vaccine in advanced economies, while the US and Europe could gain population immunity in the second half of the year . These gains could be offset by a darker regional outlook, with the recurrence of the virus in some countries.
“The recovery is expected to gain momentum in the second half of the year, assuming vaccines will become more readily available and global travel can resume gradually thereafter,” said Irvin Seah, an economist at DBS Bank Ltd. in Singapore. “In general, the economy is in full swing, but the growth rate will remain lukewarm and uneven.”
Looking up
Singapore is recovering from the worst contraction since independence
Source: Singapore Department of Statistics, Ministry of Trade and Industry
The Singapore dollar rose 0.1% to 1.3233 against the US dollar starting at 11:12 local time.
Singapore, based on trade, hit a 5.4% drop last year, MTI said, revising its preliminary estimate compared to last month for a contraction of 5.8%. The aviation, transport and hospitality sectors have suffered from the blockade of tourism and mobility restrictions – and are expected to remain weak this year, Gabriel Lim, permanent secretary to the ministry, told reporters on Monday – while financial and professional services have been stronger. during blocking and aftermath.
“There have been upward revisions for all sectors, especially in construction and services,” said Khoon Goh, Asia’s chief research officer. Australia & New Zealand Banking Group in Singapore said about the gross domestic product report. However, he noted, the data have “few monetary policy implications” and the Singapore Monetary Authority is expected to remain on hold throughout the year.
Due budget
The monetary authority, which uses the exchange rate as the main policy instrument, has stated its position appropriate and unchanged, Deputy General Manager Edward Robinson told reporters on Monday. MAS’s next scheduled political decision is in April.
What Bloomberg Economics says …
“The year-on-year decline in Singapore’s economy in Q4 has fallen much further than originally estimated. Without a significant increase in activity in the second half of the first quarter, however, we expect the contraction to extend to the first quarter of 2021. ”
– Tamara Mast Henderson, Asian economist
To read the full note, click here
Daily cases of locally transmitted viruses in Singapore have hovered close to zero over the past few weeks, encouraging plans to receive more visitors this year under different security arrangements, while others in the region, including Indonesia and Malaysia is fighting growth that exacerbates its economic pain.
Read more: Singapore sees people traveling this year as vaccines are launched
“Singapore’s semiconductor sector is in a very sweet spot,” and a takeover of construction activity could help propel goods sectors in the coming months, said Song Seng Wun, an economist at CIMB Private Banking in Singapore. “With modern services also likely to do even better this year, I keep my fingers crossed so that there can be a surprise from above” in the government’s growth forecast.
Economists in a Bloomberg poll predict that Finance Minister Heng Swee Keat will announce another fiscal deficit when he reveals details on Tuesday about the future budget for the financial year, which is expected to include targeted support for vulnerable households and businesses.
Read more: Singapore will reduce budget deficit to 4% of GDP in fiscal year 21: survey
The Singapore government said last week that the five incentive packages announced in 2020, along with weak monetary policy, have saved the economy a contraction of 12.4% or more last year.
Other details
- The ministry also released final economic estimates for the fourth quarter, showing that GDP grew by 3.8% non-annualized, seasonally adjusted over the past three months, better than the estimated 2.4% and projection previous by 2.1%. It was down 2.4% from a year earlier, better than the expected 3.6% contraction
- Production contracted by 1.4% in the fourth quarter compared to the last three months, services expanded by 4.1% and construction increased by 55.6%
- In a separate report on Monday, Enterprise Singapore said it sees an increase in non-oil exports in the range of 0% – 2% in 2021, after rising by 4.3% in 2020
- Inflation could rise in the second quarter on basic statistical effects, MAS said
– With the assistance of Chester Yung, Myungshin Cho and Tomoko Sato
(Add analysts’ comments in the third and ninth paragraphs, update the currency level.)