Singapore posts worst recession ever for 2020 but a rebound is in sight

Name: Singapore begins national Covid-19 vaccination programme
Uploaded: 2021-01-04T00:03:25.000Z
Duration: 2 min 3 s
Description: Singapore begins national Covid-19 vaccination programme

Annual GDP contracted by 5.8 per cent, according to advance estimates

Economists say the trade-reliant city state is poised for economic recovery but warn it will be uneven and dependent on the global vaccination drive

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Economists pointed to the less sharp decline in the fourth quarter as a sign that Singapore’s economy was poised for recovery. Photo: AFP

Dewey Simin Singapore

Published: 8:03am, 4 Jan 2021Updated: 8:06pm, 4 Jan 2021

Singapore’s economy contracted less sharply in the fourth quarter of 2020, as business activity continued to pick up and Covid-19 curbs were loosened amid declining infections in the community. The export-dependent city state saw GDP shrink by 3.8 per cent from the same period a year ago, compared to 5.6 per cent in the third quarter, according to advance estimates released by the Trade and Industry Ministry.

Overall, the economy, seen as a bellwether for global trade, declined by 5.8 per cent in 2020, performing slightly better than the MTI’s prediction of a -6.0 to -6.5 per cent slump.

This was Singapore’s worst recession since independence and the first time it experienced a full-year contraction since 2001, when growth fell by 1.1 per cent in the aftermath of the dotcom bust.

But economists pointed to the less sharp decline in the fourth quarter as a sign that the economy was poised for recovery. Seasonally-adjusted quarterly growth slowed from 9.5 per cent in the third quarter to 2.1 per cent. Still, they cautioned this would largely hinge on the speed of the global vaccination campaign and how its key trading partners performed. Singapore is among the first countries in Asia to begin vaccinating its population – health care workers are currently being inoculated while elderly folk are expected to receive their shots from next month.

Lee Ju Ye, an economist from Maybank Kim Eng, said economic activity in the fourth quarter was largely driven by the manufacturing sector, due to the surge in demand for semiconductors and pharmaceuticals. The construction sector was recovering she said, but she warned it would likely remain below pre-pandemic levels this year while the services sector faced a “slow and uneven” recovery.

Selena Ling, head of treasury research and strategy at OCBC Bank, said the ailing tourism, food and beverages, and retail sectors would get an “incremental lift” from the country’s further easing of Covid-19 restrictions on December 28, which among other things permitted social gatherings of up to eight people. This, Ling said, could buy businesses some time in the absence of overseas visitors.

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Singapore begins national Covid-19 vaccination programme

While she projected 4 to 6 per cent growth in 2021, she said some small businesses in the island nation would struggle to survive despite the government spending 20 per cent of GDP or a S$100 billion (US$75.6 billion) stimulus package to help businesses and citizens through the pandemic. “Business and consumer confidence remain lower than pre-coronavirus levels, partly due to the softening labour market,” Ling added.

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