Singapore maintains 2021 GDP forecast at 4% to 6% due to ‘heightened uncertainties’ from COVID-19

SINGAPORE: Singapore has maintained its growth forecast for 2021 at a range of 4 per cent to 6 per cent due to “heightened uncertainties” in the economic environment arising from the COVID-19 pandemic, the Ministry of Trade and Industry (MTI) said on Tuesday (May 25).

The forecast will be reviewed again in the next quarter when there is “more data and greater clarity” over the global and domestic economic situations, it added.

This comes despite a stronger-than-expected showing in the first quarter of the year.

For the three months of 2021, Singapore’s economy grew by 1.3 per cent year-on-year on the back of growth in the manufacturing, finance and insurance, and wholesale trade sectors.

This was much higher than the advance estimates of 0.2 per cent and marked the economy’s first quarterly growth since the pandemic erupted.

On a quarter-on-quarter seasonally adjusted basis, Singapore’s gross domestic product (GDP) expanded by 3.1 per cent between January and March, also surpassing the advance forecast of 2 per cent.

In its report, MTI said the external economic environment has improved since February even though the pandemic continues to disrupt activities in many economies and threatens to undermine any recovery.

Domestically, the broader economy “should still see a recovery this year” in tandem with the global economic rebound and further progress in the domestic vaccination programme even though recent tightening of COVID-19 safety measures marks a setback to some segments of the economy.

To combat a recent spike in local COVID-19 infections, Singapore entered what authorities called a “heightened alert” of Phase 2 on May 16, which included a new limit of two people for all social gatherings, a ban on dining in at restaurants and a return to working from home as the default. This host of measures will be in place until Jun 13.

READ: New COVID-19 measures in Singapore: What is allowed under the tighter restrictions?

Against this backdrop, MTI said the recovery of the various sectors is likely to be “more uneven than earlier expected”.

For instance, hard-hit sectors such as the tourism and aviation-related sectors, are likely to see further delay in their recovery given the slower lifting of international travel restrictions. The recent reduction in operating capacity limits at attractions will also weigh on the recovery of the arts, entertainment and recreation segment.

As such, activity in the tourism and aviation-related sectors will remain “significantly below pre-COVID levels” even by the end of the year and the prospects of a significant recovery remain challenging.

MTI said while it is possible that the Singapore economy will outperform the 4 per cent to 6 per cent forecast range for 2021, there are “significant downside risks”.

READ: Singapore economy may grow more than 6% this year, but recovery will be ‘disparate’ across sectors: MAS

Top on the list is the trajectory of the COVID-19 pandemic, with countries experiencing recurring waves of infections given the emergence of more transmissible strains of the virus. 

“Given the experience of the last 15 months, there is hope that even if outbreaks flare up again, countries will be able to avoid repeated blanket lockdowns and their high economic cost, but this is far from certain,” MTI said.

“As these countries include some of our major economic partners in our region, the uncertainty in their outlook also affects Singapore.”

Locally, while the COVID-19 situation is generally well under control and progress is being made with the vaccination programme, significant risks and uncertainties remain.

“These non-economic risks can have a major impact on our GDP growth this year,” it added.