Singapore raises 2021 growth forecast to 6-7% on faster Covid-19 vaccinations

SINGAPORE – Singapore expects its economy to grow at a faster pace than previously predicted as vaccinations gain pace, allowing for more economic activity and boosting demand for goods and services at home and in some of its key markets abroad.

The Ministry of Trade and Industry (MTI) on Wednesday (Aug 11) upgraded its gross domestic product (GDP) growth forecast range for 2021 to 6 per cent to 7 per cent.

The new prediction compares with the previous full-year forecast of 4 per cent to 6 per cent, made first in November last year and comes after Singapore began easing some of its Covid-19-related curbs this week and vaccination coverage topped above 70 per cent of the population.

The MTI 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 euro zone, which have in turn allowed them to press on with their reopening plans.

The forecast for faster growth was also backed by a better-than-expected economic performance in the first half of the year when GDP grew 7.7 per cent from the first six months of 2020.

The upgrade didn’t come as a surprise, as most private economists had already raised their projections for 2021 GDP growth, ranging from 6.3 per cent to 7.5 per cent.

However, the recovery will neither be even across the economy, nor is the outlook without risks.

Mr Gabriel Lim, Permanent Secretary for Trade and Industry, said: “The Singapore economy is expected to continue to see a gradual recovery in the second half of the year, supported in large part by outward-oriented sectors.”

While the progressive easing of domestic and border restrictions will support the recovery of consumer-facing sectors and alleviate labour shortages for migrant-reliant sectors, demand is not expected to return quickly as travel restrictions globally are likely to be lifted cautiously, which will limit growth in tourism- and aviation-related sectors, he said.

For the outward-oriented sectors, such as manufacturing and wholesale trade that have so far led the recovery, the risk comes from Asian economies where curbs have been reimposed.

MTI said the recovery momentum in China may ease in the second half of 2021 on the back of a moderation in investment growth and as the latest Covid-19 outbreak weighs down consumption.

South-east Asian economies such as Malaysia, Indonesia and Thailand may suffer as well amid the tightening of restrictions.

However, the pace of growth is set to quicken in the US, euro zone and Japan.

Mr Irvin Seah, senior economist at DBS Bank said the global outlook suggests that Singapore’s export-driven manufacturing sector will continue to remain in expansion mode even if some of the momentum in the first half of the year wanes.

“Beyond electronics, strong performance is expected from the petrochemical, precision engineering and transport engineering clusters in the coming quarters,” he said.

Also on Wednesday, Enterprise Singapore again hiked its 2021 trade forecasts amid the Republic’s better-than-expected second-quarter growth and expectations of higher 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.

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.