Singapore's growth forecast at 'around 7%' for 2021, 3-5% for 2022

SINGAPORE'S official full-year growth forecast for 2021 has been narrowed to "around 7 per cent", at the high end of the previous forecast range of between 6 and 7 per cent.

Growth for 2022 is forecast at 3 per cent to 5 per cent, the Ministry of Trade and Industry (MTI) said on Wednesday (Nov 24) in its release of updated third quarter gross domestic product (GDP) figures.

In 2022, growth prospects remain strong for outward-oriented sectors, as well as information and communications, and finance and insurance, said MTI.

But the value-added for the food and beverage (F&B) services, as well as output for the construction and marine and offshore engineering sectors, are not expected to recover to pre-pandemic levels even by the end of 2022.

Q3 growth came in at 7.1 per cent, revised upwards from the preliminary figure of 6.5 per cent and bringing GDP growth for the first three quarters to 7.7 per cent.

This was a slowdown from Q2, which saw strong growth of 15.2 per cent due to the low base in the year-ago period.

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But on a quarter-on-quarter seasonally-adjusted basis, the economy grew 1.3 per cent, up from the preliminary growth figure of 0.8 per cent and reversing the 1.4 per cent contraction in the second quarter.

Following Wednesday's release, JPMorgan analyst Ong Sin Beng and Barclays economist Brian Tan both maintained their 2022 growth forecasts at 5 per cent, at the top of MTI's forecast range. They also revised their 2021 full-year growth forecasts upwards, to 7 per cent and 6.8 per cent respectively.

Tan, who expects slower sequential growth of 1 per cent in Q4, said: "While social distancing measures have been gradually eased through the quarter to allow for greater social interaction and community mobility as Covid-19 infections fell, we take a relatively cautious view on the near-term outlook as the rules still require employees to work from home by default through the rest of this year, limiting the headroom for the economy's recovery."

For 2022, Singapore’s high vaccination rate and roll-out of booster shots will facilitate continued easing of domestic and border restrictions, which will support the recovery of consumer-facing sectors and alleviate labour shortages in sectors reliant on migrant workers, said MTI. "Air travel and visitor arrivals are also expected to improve with the loosening of travel restrictions and expansion of vaccinated travel lanes."

Still, recovery is expected to remain uneven. Growth prospects for outward-oriented sectors such as manufacturing and wholesale trade remain strong, given robust external demand. Healthy demand is also expected to drive growth in the information and communications sector, as well as the finance and insurance sector.

But recovery of aviation and tourism-related sectors is likely to be gradual, with activity expected to stay below pre-Covid levels throughout the year ahead.

While consumer-facing sectors such as retail trade and food and beverage (F&B) services should recover as restrictions are eased and consumer sentiment improves, the value-added of the F&B sector is not likely to return to pre-Covid levels by the end of 2022, “as some dine-in and event restrictions could remain in place, while the recovery in visitor arrivals is expected to be slow”.

And while the value-added of the retail trade sector should recover to pre-pandemic levels by end-2022, "some segments such as department stores are likely to remain lacklustre, in part due to weak visitor arrivals".

As for the migrant-worker-reliant sectors of construction and marine and offshore engineering, these are expected to recover as border curbs are eased. But as it will take time to fully address the shortfall in required labour, labour shortages are likely to keep the output of these sectors below pre-pandemic levels in 2022.

Wednesday's release provided updated figures for sectoral growth in Q3. The manufacturing sector grew 7.2 per cent year on year, slowing from the preceding quarter's 17.9 per cent growth. On a quarter-on-quarter seasonally-adjusted basis, it shrank by a marginal 0.1 per cent, easing from Q2's 2.2 per cent contraction.

Due to a low base a year ago, the construction sector grew 66.3 per cent, slowing from 117.5 per cent in Q2. In absolute terms, value-added for the sector was still 21.1 per cent below the pre-pandemic level in Q3 2019.

The wholesale trade sector grew 5.9 per cent year on year, faster than Q2's 3.4 per cent growth, while the information and communications sector maintained the same pace of growth from the previous quarter at 10.4 per cent.

But with Q2 growth having been boosted by a low-base effect, many sectors saw growth moderate in Q3, including retail trade; transportation and storage; finance and insurance; real estate; and professional services.

Several sectors saw contraction. Accommodation contracted 4.1 per cent, reversing Q2's 15.8 per cent growth on a low base. F&B services shrank 4.2 per cent with the tightening of Covid-19 curbs, reversing Q2's 36.9 per cent growth. The administrative and support services sector contracted by 1.3 per cent, worsening from flat growth in Q2.

Finally, the "other services industries" category grew by 4.4 per cent, slowing from 16.1 per cent growth in the previous quarter. Contraction in the arts, entertainment and recreation segment was outweighed by growth in segments such as education; health and social services; public administration and defence; and others.