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. How did Singapore get residents to trust its TraceTogether virus app? 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. 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. Singapore’s budget will be announced on February 16 and all eyes will be on additional fiscal support for businesses. Lee of Maybank Kim Eng pointed out that Singapore was experiencing a U-shaped recovery as opposed to the V-shaped one during the 2003 Sars outbreak. This meant it would likely only see pre-pandemic economic levels in early 2022. Economists said a slow process of inoculation with countries failing to achieve herd immunity could hinder Singapore’s recovery, as could lockdowns in countries struggling to contain the virus. Singapore economy stabilising, but ‘not yet out of the woods’, PM says “A prolonged lockdown in Malaysia , for instance, has disrupted trade and labour flows. New Covid-19 waves in Hong Kong, Australia, Britain and South Korea are also hindering the further reopening of borders,” said Lee. Song Seng Wun, economist at CIMB Private Banking, noted that some of the countries slapped with harsher restrictions are Singapore’s key trading markets. He added: “Singapore wants to open up, it wants to see trade in goods and services getting a lift from stronger consumption in all our end-markets but obviously restrictions and lockdowns can affect confidence and consumption in those countries.” Song noted that Monday’s estimates would potentially place Singapore among the worst-performing economies in the region, though this was something he found unsurprising due to the nature of the city state’s export-focused economy. “Even though Singapore controlled the pandemic and contained it better [than other Southeast Asian countries], external conditions remain far more challenging,” he said. “Domestic demand is too small to prop up an externally-led economy.” Lee pointed to Vietnam’s 2020 GDP figure – 2.9 per cent – announced last week and said Indonesia and Malaysia would likely fare better than Singapore, though the city state could do a tad better than the Philippines due to the strict lockdown there as well as Thailand, which relies heavily on tourism. Song said Asia – fuelled by China and Vietnam ’s strong growth – would anchor a global recovery in terms of stronger demand in goods and services. But he acknowledged that for now, the overall picture in the region remained similar: “2020 was brutal and we are trying to get back on our feet.” “There are great expectations in 2021 with vaccines and perhaps, a less confrontational US [under the Biden administration] when dealing with China would help improve business and consumer confidence,” he added.