Singapore raises growth forecast to 6 to 7 per cent
GDP growth of 6-7 per cent projected; gradual recovery supported by outward-oriented sectors
Singapore expects its economy to grow at a faster pace than previously predicted as Covid-19 vaccination rates here gain pace, allowing for more economic activity and boosting demand for goods and services at home and in some of its key markets abroad.
The Ministry of Trade and Industry (MTI) yesterday upgraded its gross domestic product (GDP) growth forecast range for this year to 6-7 per cent.
The new prediction compares with the previous full-year forecast of 4-6 per cent made last November.
It comes after Singapore began easing some Covid-19-related curbs this week and vaccination coverage topped 70 per cent of the population.
MTI said while Covid-19 cases continue to rise globally, owing to the spread of the highly transmissible Delta variant, vaccination rates have picked up in key advanced economies such as the United States and the euro zone, which have in turn allowed them to press on with their reopening plans.
The forecast for faster growth was also backed by a better-than-expected economic performance in the first half of the year, when GDP grew 7.7 per cent from the first six months of last year.
The upgrade did not come as a surprise, as most private economists had already raised their projections for 2021 GDP growth to 6.3-7.5 per cent.
However, the recovery will not be even across the economy, and the outlook is not without risks.
Mr Gabriel Lim, Permanent Secretary for Trade and Industry, said: "The Singapore economy is expected to continue to see a gradual recovery in the second half of the year, supported in large part by outward-oriented sectors."
While the progressive easing of domestic and border restrictions will support the recovery of consumer-facing sectors and alleviate labour shortages for migrant-reliant sectors, demand is not expected to return quickly as global travel restrictions are likely to be lifted cautiously, which will limit growth in sectors related to tourism and aviation, he said.
For outward-oriented sectors, such as manufacturing and wholesale trade that have so far led the recovery, the risk comes from Asian economies where curbs have been reimposed.
MTI said the recovery momentum in China may ease in the second half of the year on the back of a moderation in investment growth and as the latest Covid-19 outbreak weighs down consumption.
South-east Asian economies such as Malaysia, Indonesia and Thailand may suffer as well, amid the tightening of restrictions.
However, the pace of growth is set to quicken in the US, the euro zone and Japan.
Mr Irvin Seah, senior economist at DBS Bank, said the global outlook suggests that Singapore's export-driven manufacturing sector will remain in expansion mode even if some of the momentum in the first half of the year wanes.
"Beyond electronics, strong performance is expected from the petrochemical, precision engineering and transport engineering clusters in the coming quarters," he added.