• The Ministry of Trade and Industry trimmed its growth forecast for 2020
• Singapore’s economy is now projected to shrink between 6 and 6.5 per cent
• MTI also forecast the economy to grow between 4 and 6 per cent in 2021 
• The employment outlook is likely to still remain challenging next year

SINGAPORE — Singapore’s economy performed better than initial estimates in the third quarter, shrinking 5.8 per cent compared with the same period a year ago — a smaller contraction than the advanced estimate of 7 per cent. 

It also did better on a quarter-on-quarter seasonally adjusted basis, growing 9.2 per cent compared with the second quarter, stronger than the 7.9 per cent growth from initial estimates. 

But the Trade and Industry Ministry (MTI) on Monday (Nov 23) slightly downgraded its growth forecast for Singapore for 2020, projecting the economy to contract by between 6 and 6.5 per cent, compared to an earlier estimate of between 5 and 7 per cent contraction. 

“The improved performance of the Singapore economy came on the back of the phased resumption of activities in the third quarter following the circuit breaker that was implemented from April 7 to June 1, 2020, as well as the rebound in activity in major economies during the quarter as they emerged from their lockdowns,” read MTI’s statement. 

MTI also said that the global economic situation has remained subdued. With the United States and Eurozone experiencing a resurgence in Covid-19 infections, their recovery may slow as restrictions are re-imposed to slow the spread of the virus. 

MTI expects growth for 2021 to come in between 4 and 6 per cent. 

“The recovery of the Singapore economy in the year ahead is expected to be gradual, and will depend to a large extent on how the global economy performs and whether Singapore is able to continue to keep the domestic Covid-19 situation under control,” it said.  

When asked for reasons the projections for 2021 are at a growth level higher than what Singapore has experienced for the last few years, MTI permanent secretary Gabriel Lim said at a press briefing on Monday that it is partly due to a low base effect of 2020. 

This means that the growth rates in 2021 would seem strong because of how poorly the economy has performed this year, a result of the fallout from the Covid-19 pandemic. 

Notwithstanding the growth projections, Mr Lim said that Singapore’s gross domestic output (GDP) would not surpass the levels seen in 2019. 

Speaking at a separate press conference, Trade and Industry Minister Chan Chun Sing said the Government is working very hard to make sure that GDP levels in 2021 would be as close to 2019 as possible. 

However, Mr Chan said that Singapore’s economy would be “qualitatively” very different, even if GDP figures return to 2019 levels “quantitatively”.

That’s because of how Covid-19 has brought about irreversible shifts in the global economic system, such as changes in the supply chain. 

When asked how long it would take for Singapore’s economy to benefit from the recent signing of the Regional Comprehensive Economic Partnership — a trade pact between 15 Asia-Pacific economies, including Singapore — Mr Lim said a realistic outcome would be for the impact to be seen in the next few years, and not in the next few months. 

Conditions in the labour market are expected to still be challenging as companies would hold back on hiring, said Mr Kenny Tan, director of the manpower planning and policy division at the Ministry of Manpower. 

Unemployment is expected “to possibly remain at elevated levels compared to the normal 3 per cent we have seen for the last five years”, he said. 

What will affect Singapore’s economic recovery are the city-state’s Covid-19 infection rates, the ability of businesses and workers to adapt to the new realities of a Covid-19 world, geopolitical dynamics between the United States and China, as well as the recurring waves of infection happening globally, said Mr Chan. 

While the first two factors are within Singapore’s control, the other two are not, he added.

“So long as we manage the controllable factors well, and mitigate the risks of those beyond our control, I believe we can recover more quickly,” said Mr Chan. 

SINGAPORE’S THIRD QUARTER FIGURES AT A GLANCE

Manufacturing

• Grew 10 per cent year-on-year (declined by 0.8 per cent in previous quarter)

• Electronics, biomedical manufacturing and precision engineering clusters drove the expansion, particularly due to strong demand for semiconductors and semiconductor equipment 

Construction

• Shrank 46.6 per cent year-on-year (60 per cent contraction in previous quarter)

• MTI's economics division director Yong Yik Wei said constructions firms are resuming work slower than expected due to difficulties faced in implementing safe distancing measures 

Wholesale and retail trade

• Contracted 4.3 per cent year-on-year (6.7 per cent decline in previous quarter)

Transportation and storage sector

• Shrank at a slower pace of 29.6 per cent year-on-year (39.2 per cent decline in the second quarter)

• The air transport segment was weighed down by the continued slump in air passengers handled at Changi Airport due to ongoing global travel restrictions and sluggish air travel demand

• The water transport segment contracted because of a fall in sea cargo volume handled 

Accommodation and food services

• Contracted by 24 per cent year-on-year (41.8 per cent contraction in the previous quarter)

• The plunge in international travellers affected the accommodation segment

Information and communications

• Grew by 2 per cent year-on-year (0.8 per cent contraction in previous quarter)

Finance and insurance

• Grew 3.2 per cent year-on-year (2.7 per cent growth in previous quarter)