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Commentary: A return to Phase 2 could be a momentary setback to Singapore’s economic recovery

Singapore was on track for a highly anticipated 2021 growth recovery theme, but it is too early to predict if the second half of the year will be derailed, says OCBC chief economist Selena Ling.

Commentary: A return to Phase 2 could be a momentary setback to Singapore’s economic recovery

Office workers in protective face masks at Singapore's Central Business District. (File photo: Calvin Oh)

SINGAPORE: The Singapore economy faces a possible momentary setback in its recovery.

Singapore will shift back into Phase 2 of the safe distancing measures from Saturday (May 8) after a rise in COVID-19 community cases in recent weeks.

Social gatherings must shrink to five from the eight allowed in Phase 3. Gyms will be shut until May 30. Employers must ensure no more than 50 per cent of employees are at the workplace at any time, down from the 75 per cent previously allowed.

The first quarter of 2021 gave us hope for a V-shaped recovery, with the Singapore economy returning to positive growth for the first time after a gruelling year. Official rhetoric suggested the 4 per cent to 6 per cent growth forecast is likely to be exceeded.

A quarterly survey by the Monetary Authority of Singapore (MAS) of 24 economists and analysts in March estimated the Singapore economy to expand at between 5 per cent and 6.9 per cent.

READ: Commentary: Contours of Singapore’s post-COVID economy are coming into sharper focus

READ: Commentary: Manufacturing remains key engine of Singapore economy. It just looks different


Still, it is too early to predict if the second half of the year will be derailed.  Given the better-than-expected growth in the first quarter of 2021, it is still plausible that full-year growth will come in around or slightly higher than 6 per cent for the year – provided the community cases in Singapore don’t necessitate a prolonged stay in Phase 2 or worse.

That said, the impact of the latest measures may affect different sectors to varying magnitudes, with F&B and the fitness industries likely to see their climb to recovery even more strenuous. Much will depend on how businesses and workers respond, and if they can apply lessons learnt over the past year to get over this bump and others that might materialise to manage the impact.

The good news is the productivity hit should be modest. By now, many Singaporean workers are familiar with a hybrid work model, comfortable with working from both home and office.

Although many employees will have to go back to working from home with the new restrictions, it’s been barely a month after the percentage of people allowed to work in office was raised to 75 per cent on Apr 5.

A woman works from her bed. (Photo: Unsplash/Windows)

In fact, this may give yet another impetus for employers to provide more flexible workspace arrangements in the medium-term, given the uncertainty and prevalence of new strains of the virus. But commercial landlords and REITS may worry about near-term occupancy prospects.

READ: Commentary: Why employers should cover WFH expenses


Retail shops and dining places, especially those in the CBD, will lament the policy reversal the most. Those who had already made plans to celebrate Mother’s Day over the weekend have tempered their festivities or returned to virtual celebrations or scale down.

Restaurants will now have to rearrange their tables to seat a maximum of five instead of eight people. Again, the back-and-forth transition between phases may call for a high degree of flexibility in tweaking restaurant layouts, so modular set-ups may work better as long as COVID-19 remains prevalent, while F&B outlets may find it more prudent to keep manpower variable.

For gym-goers like me, going back to virtual workouts and jogging in the park brings back some uncomfortable memories of the circuit breaker. For a more sustainable model, fitness offerings may have to look beyond on-site and hybrid offerings and seriously consider more off-site, customised and flexible options.

READ: Commentary: Why shopping hours in some Orchard Road malls and retailers are changing

READ: Commentary: Retail isn’t dead – look at snaking queues outside Apple stores


Travel might see the biggest hit. The extension of Stay-Home-Notice (SHN) for travellers from higher-risk regions and countries from 14 to 21 days may deter more arrivals in the near term.

The Singapore-Hong Kong travel bubble may also be affected, to the disappointment of those who had snapped up flight tickets for travel from May 26, although there are no official announcements yet if the special travel arrangements between both destinations will once again be put on hold.

The key uncertainty is whether the current vaccines would be effective against the more virulent and new COVID-19 strains and if herd immunity remains something of a pipe dream for now.

(What do new COVID-19 variants mean for Singapore? Infectious disease and public health experts weigh in on CNA's Heart of the Matter:)


The effect on the MICE industry is fuzzy. Event organisers, performers and cinema players will also have to exercise greater caution going ahead.

We are also as yet unclear how the Shangri-La Dialogue or the World Economic Forum meeting, due to take place later this year, would be affected. Mass participation sports events would be suspended, so fans of Formula 1 have to wait longer to find out if the grand prix is coming to town.

The Singapore Tourism Industry Conference 2021 was held at Suntec Convention Centre on Apr 7, 2021. (Photo: Tang See Kit)

Attractions, museums and tours will also have their capacity capped, which imply a longer runway to recovery. Weddings with more than 50 guests would also require pre-event testing (PET), much to the dismay of hotels, food caterers and, of course, the guests themselves.


One exception could be the domestic property market which could still prove to be immune to other economic trends.

Private property has risen in recent quarters as local demand remains resilient in an environment of ample liquidity and low interest rates. Barring any hints of cooling measures if prices get too carried away, the return to Phase 2 is unlikely to sink enthusiasm for the property market at this juncture. 

READ: Commentary: Concerned about what fall in private home sales mean? Market fundamentals paint a different story

The future of work has fundamentally changed amid the pandemic. This will have significant implications on how the Singapore economy trains, upskills and retains talent.

How one measures labour productivity, performance assessment and renumeration more carefully in a hybrid work model also bears consideration and is likely to have a lasting impact on how Singapore companies can move as the war against COVID-19 continues.

Are cooling measures on the cards after four quarters of price increases in the residential property market? CEO Propnex Ismail Gafoor and NUS Institute of Real Estate Studies Dr Lee Nai Jia give on their take on CNA's Heart of the Matter podcast:


Selena Ling is Head of Treasury Research and Strategy at OCBC Bank.

Source: CNA/el


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