Singapore's growth to stabilise in H2, full-year growth may beat official forecast: OCBC

DESPITE the growth speed bump presented by tightened Covid-19 measures from May to June, the momentum of Singapore's growth should stabilise in the second half of the year, OCBC head of treasury research and strategy Selena Ling said in the bank's global outlook report for the second half of 2021.

Ms Ling expects full-year growth to still come in at 6 per cent year-on-year or slightly higher, above the government's official forecast of 4-6 per cent - which is set to be reviewed in August.

The floor to OCBC's forecast is 5.5 per cent, even after factoring in the setback of Phase 2 Heightened Alert measures.

The Covid-19 situation has dampened recovery hopes for food and beverage (F&B) services, commercial landlords, meetings, incentives, conferences, and exhibitions (MICE), aviation, and many other hospitality-related industries, while the foreign manpower crunch has worsened in the construction, marine, and process industries due to entry curbs.

These industries may remain below pre-Covid levels by the end of the year, and "a more uneven sectoral divergence appears inevitable for the next few quarters", said Ms Ling.

The key questions are whether the Covid-19 situation and tightened measures continue into Q3 - both regionally and at home - and whether the manufacturing sector continues to hold up, she added.

Ms Ling sees manufacturing as still the main driver of Singapore's recovery, particularly the electronics cluster.

"As global trade picks up, recovering demand coupled with supply chain strains should support the strong manufacturing momentum over the coming months," she said.

Retail sales are also expected to recover faster compared to the global financial crisis, she added. In this pandemic, retail demand did not disappear - rather, spending was diverted due to mall closures, seating limitations in F&B outlets, and so on.

Ms Ling expects full-year retail sales to rebound 10.5 per cent year on year in 2021, after last year's 15.3 per cent contraction.

As for monetary policy, she expects policymakers to try to stay accommodative, so that the recovery can be entrenched.

There is no rush to recalibrate current policy settings at the next meeting in October, as core inflation remains comfortably within the 0-1 per cent official forecast range, even as headline inflation is buoyed by low base effects and rising commodity prices, she said.

This outlook for Singapore is in line with OCBC's broader global outlook, with the economic recovery momentum sustaining into the second half, even if sectoral recovery remains uneven.