Singapore maintains 2022 GDP forecast at 3% to 5%, after economy grew 7.6% last year

SINGAPORE: Singapore has maintained its growth forecast for this year at 3 to 5 per cent as data on Thursday (Feb 17) showed the economy staging a recovery in 2021.

The Singapore economy expanded 7.6 per cent last year, mainly lifted by the manufacturing, finance and insurance, and wholesale trade sectors, said the Ministry of Trade and Industry (MTI) in a press release.

This marked the fastest full-year growth since 2010’s record 14.5 per cent.

MTI also revised the gross domestic product (GDP) figure for the pandemic-hit 2020 to a decline of 4.1 per cent, up from an earlier contraction estimate of 5.4 per cent.

This upward revision was due to better performances in sectors such as wholesale trade, transportation and storage, information and communications, and finance and insurance, said MTI’s economics division director Yong Yik Wei.

“The preliminary estimates are based on available data at the point in time,” she told reporters. “As more comprehensive data becomes available over the course of the year through the annual survey results, the estimates are updated.”

“UNEVEN” RECOVERY OUTLOOK FOR 2022

Moving forward, MTI said the economy will continue to grow, albeit unevenly, in 2022.

It noted that the outlook for Singapore’s external demand has “deteriorated slightly” since its last report in November, as many economies tightened restrictions to combat the highly transmissible Omicron variant.

Global supply bottlenecks remain and are expected to persist throughout the first half of this year. This may constrain industrial production and growth in some external economies in the near term.

These persistent supply chain snarls, alongside rising energy prices due to geopolitical tensions, have also exacerbated global inflationary pressures.

At the same time, downside risks in the global economy have increased, MTI said.

These include uncertainties about the trajectory of the COVID-19 pandemic and global supply chain disruptions, as well as faster-than-expected monetary policy tightening in the advanced economies.

Energy prices are also facing “significant upside risks” amid supply concerns due to escalating geopolitical tensions involving Russia and Ukraine, and in the Middle East, as well as unpredictable weather conditions.

“A spike in energy prices would exacerbate inflationary pressures and weigh on global economic growth,” MTI said.

Turning to its domestic outlook, MTI noted that Singapore’s high vaccination rate and steady rollout of booster shots should “facilitate further progressive easing of domestic and border restrictions”.

The country’s COVID-19 multi-ministry task force announced on Wednesday changes to its safety protocols, while adding new vaccination travel lanes and streamlining border measures.

It also indicated that if things remain “well under control”, Singapore can take further significant steps to ease measures after the peak of the Omicron wave passes.

“This will support the recovery of our consumer-facing sectors and alleviate labour shortages in sectors that are reliant on migrant workers,” MTI’s permanent secretary Gabriel Lim said at a press conference.

“Air travel and visitor arrivals are also expected to improve with the gradual loosening of travel
restrictions and expansion of vaccinated travel lanes.”

Taken together, MTI noted that the Singapore economy is “expected to continue to expand this year, although the outlook for the various sectors remains uneven”.

Growth prospects for the outward-oriented sectors, such as manufacturing and wholesale trade, are set to remain strong amid the continued global economic rebound.

Aviation and tourism-related sectors are expected to see a slow recovery, while consumer facing sectors such as retail and food and beverage services are projected to see a more "gradual recovery over the course of the year".

For aviation and tourism-related sectors, recurring COVID-19 outbreaks and potential virus mutations could delay the lifting of travel restrictions globally. Travel demand is also likely to take time to recover.

While the progressive easing of COVID-19 curbs and an improvement in consumer sentiment will help consumer-facing sectors, the real value-added of the F&B services sector and some tourist-reliant segments of the retail trade sector are not expected to return to pre-pandemic levels this year. 

The latter is partly due to a slow recovery in visitor arrivals, MTI added.

Meanwhile, separate data released on Thursday showed Singapore’s non-oil domestic exports (NODX) rose 12.1 per cent year on year in 2021, nearly tripling from the 4.3 per cent growth in 2020, on the back of higher electronic and non-electronic product shipments.

Expecting growth “to ease from a high base” this year, the outlook for NODX is maintained at 0 to 2 per cent, said Enterprise Singapore.

2021 RECOVERY

For 2021, the Singapore economy closed out the year on a stronger-than-expected note.

The country’s GDP grew by 6.1 per cent year on year in the fourth quarter, slightly above advance estimates of 5.9 per cent.

This took full-year growth to 7.6 per cent, above the official full-year growth forecast of “around 7 per cent”.

Manufacturing, which accounts for about one-fifth of the economy, grew by 13.2 per cent last year, picking up speed from the 7.5 per cent growth in 2020.

Within the sector, output across all clusters rose, with the precision engineering, electronics and transport engineering clusters registering the largest increases.

Staging a turnaround from a 38.4 per cent contraction in 2020, the construction sector expanded by 20.1 per cent on the back of public and private sector construction works.

Also on a rebound, the services producing industries grew by 5.6 per cent in 2021, reversing from the 5.1 per cent contraction in the year before. 

All services sectors expanded, except for the administrative and support services sector, MTI said.

This breakdown in fourth-quarter data showed that economic growth has been broad-based and is set to continue into 2022, said Capital Economics’ economist Alex Holmes.

While the rapid spread of the Omicron variant may weigh down on Singapore's first-quarter GDP performance, the new COVID-19 variant "is likely to prove only a small stumbling block on the road to recovery”.

"One of the world’s most widespread vaccination coverages has enabled the Government to treat this differently from other waves – containment measures were actually simplified and slightly loosened yesterday," he said, adding how the firm's own mobility tracker also indicated that the movement of people has been holding up.

"Overall, the economic impact of Omicron looks set to be relatively mild and brief. We expect the recovery to be back on track by next quarter," said Mr Holmes.