Singapore to see strong GDP rebound after 2020 contraction

SINGAPORE (ICIS)–Singapore’s economy is expected to see a strong rebound this year after contracting by 5.4% in 2020, supported by a robust manufacturing sector as its outward-oriented sectors continue to benefit from rising external demand.

The country’s GDP fell by 2.4% year on year in the fourth quarter of 2020, weighed by the 27.4% and 4.7% contractions in the construction and services-producing sectors, respectively, according to data from the Ministry of Trade and Industry (MTI).

Singapore’s economic forecast for 2021 has been maintained at “4.0% to 6.0%” as uncertainties and risks in the global economy remain, MTI said on 15 February.

“Although the speed of vaccine deployment varies, advanced economies like the US and Eurozone are likely to reach population immunity by the second half of this year, which should in turn spur their economic recoveries,” it said.

The US economy is projected to rebound this year on the back of a recovery in personal consumption expenditure, which is in turn expected to be bolstered by the injection of additional fiscal stimulus amidst an improvement in
the health situation and the progressive rollout of vaccines, MTI said.

In Asia, China’s economy is projected to continue strengthening this year, driven by healthy growth in investment, consumption and exports, it said.

Meanwhile, the key ASEAN economies are expected to post a recovery this year, supported by a pickup in external demand, even though domestic demand is likely to be dampened by the recent wave of coronavirus cases and associated measures taken to contain the virus, the ministry said.

“On the other hand, the growth prospects for regional economies such as Malaysia and Indonesia have weakened due to the recent resurgence in infections, which has necessitated the re-imposition of lockdowns and restrictions,” MTI said.

Japan’s Nomura Global Markets Research in a note said that it has maintained its 2021 GDP growth forecast for Singapore at 7.5%, assuming that economic output will return to pre-coronavirus levels by the second quarter, the fastest in ASEAN.

“We remain optimistic of a still-robust manufacturing sector, which we think will receive a double boost from strong external demand for electronics, which is buoyed by the global tech up-cycle, as well as from pharmaceuticals output, which is benefitting from surging global vaccine demand,” it said.

Q4 IMPROVEMENT LED BY MANUFACTURING SECTOR
Singapore’s fourth-quarter GDP print was an improvement from the 5.8% contraction in the preceding quarter.

On a quarter-on-quarter seasonally adjusted basis, Singapore’s economy expanded by 3.8% in October-December 2020, following the 9.0% growth recorded in the previous quarter.

The manufacturing sector grew by 10.3% year on year in the fourth quarter of last year, extending the 11.0% expansion in the third quarter.

The growth in manufacturing activity was supported by output expansions in the electronics, biomedical manufacturing, precision engineering and chemicals clusters, which more than offset output declines in the transport engineering and general manufacturing clusters.

The construction sector contracted by 27.4% year on year due to  declines in both public sector and private sector construction works, although this was an improvement from the 52.5% contraction recorded in the third quarter.

Focus article and interactive by Nurluqman Suratman