Tuesday, 21 Sep 2021

Singapore raises 2021 growth forecast to 6-7%; recovery 'largely on track' despite Delta variant

SINGAPORE – Singapore upgraded its economic growth forecast range for 2021 to 6 per cent to 7 per cent taking into account the better-than-expected performance of its economy in the first half of the year, as well as the latest external and domestic economic developments.

The new prediction compares to the previous official growth forecast of 4 per cent to 6 per cent, made first in November last year.

The Ministry of Trade and Industry (MTI), which announced the forecast, said that while Covid-19 cases continue to be on the rise globally due to the spread of the highly transmissible Delta variant, vaccination rates have also picked up in key advanced economies such as the US and Eurozone, which have in turn allowed them to press on with their reopening plans.

In contrast, regional economies which have been slow to vaccinate their populations have had to re-impose restriction measures to curb a resurgence in infections. This has in turn dampened their growth outlook, MTI said.

“On balance, the recovery in external demand for Singapore for the rest of the year remains largely on track,” the ministry noted.

Enterprise Singapore, meanwhile, hiked its 2021 trade forecasts amid the Republic’s better-than-expected  second-quarter growth – particularly in electronics, specialised machinery and petrochemicals – and higher expected oil prices that support the oil trade.

Non-oil domestic exports (Nodx) are now tipped to grow 7 per cent to 8 per cent, up from the 1 per cent to 3 per cent previously forecast. Total merchandise trade is predicted to increase by 13 per cent to 14 per cent, much higher than the  previous forecast of 5 per cent to 7 per cent growth.

This comes after Nodx grew by 10.1 per cent in the second quarter, following the 9.7 per cent rise in the first quarter, driven by increases in both electronics and non-electronics shipments. Total merchandise trade surged by 27.3 per cent, up from the 4.9 per cent growth in the previous three months.  The oil trade jumped 98.4 per cent amid higher oil prices than a year ago, a turnaround from previous declines.

At home, Singapore began easing some of its Covid-related curbs this week, allowing dining in to resume and raising group sizes to five for those who’ve been fully vaccinated. Work from home rules are expected to ease next week.

The easing of restrictions came as Singapore announced that 70 per cent of its population has been fully vaccinated, and 79 per cent have received at least one dose.

According to MTI, the Singapore economy expanded by 14.7 per cent on a year-on-year basis in the second quarter of 2021, faster than the 1.5 per cent growth in the previous quarter.

The strong growth was largely due to the low base in the same period last year when gross domestic product (GDP) fell by 13.3 per cent as a result of the circuit breaker (CB) measures implemented from April 7 to June 1, 2020, as well as the sharp fall in external demand amidst the Covid-19 pandemic.

In absolute terms, GDP remained 0.6 per cent below its pre-pandemic level in the second quarter of 2019, MTI said.

On a quarter-on-quarter seasonally-adjusted basis, the Singapore economy contracted by 1.8 per cent in the second quarter of 2021, a reversal from the 3.3 per cent expansion in the first quarter.

Growth in the quarter was led by the manufacturing sector that expanded by 17.7 per cent year on year, extending the 11.4 per cent growth recorded in the previous quarter.

The construction sector grew by 106.2 per cent year on year, a sharp turnaround from the 23.2 per cent contraction in the previous quarter, as both public and private sector construction works expanded.

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The wholesale trade sector expanded by 2.9 per cent year-on-year, easing from the 3.5 per cent growth in the previous quarter.

The retail trade sector expanded by 50.7 per cent year-on-year, accelerating from the 1.6 per cent growth in the previous quarter. The transportation & storage sector grew by 20.9 per cent year-on-year, a turnaround from the 15.8 per cent contraction in the preceding quarter.

The information and communications sector expanded by 9.6 per cent year-on-year, a step up from the 6.8 per cent growth in the previous quarter.

The real estate sector grew 25.8 per cent year-on-year, a turnaround from the 3.1 per cent contraction in the previous quarter. The accommodation sector expanded by 13.2 per cent year-on-year, easing from the 16.3 per cent growth in the preceding quarter.

The food and beverage services sector expanded by 36.7 per cent year-on-year, a turnaround from the 9.2 per cent contraction in the previous quarter.

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