Private-sector economists raise Singapore 2021 growth forecast to 5.8%: MAS survey

SINGAPORE – Singapore’s economy will grow by 5.8 per cent this year, better than the 5.5 per cent expansion predicted earlier, according to a central bank survey of professional forecasters.

The growth estimates by 24 economists and analysts, in the quarterly survey by the Monetary Authority of Singapore (MAS), ranged between 5 per cent and 6.9 per cent. That was wider than the 5 per cent to 5.9 per cent range the survey had in December last year.

The Ministry of Trade and Industry (MTI) left unchanged last month its forecast for Singapore’s gross domestic product (GDP) to grow between 4 per cent and 6 per cent – the most since 2011, when the economy expanded by 6.3 per cent.

This, however, is coming off a particularly low base as MTI estimates the economy shrank 5.4 cent last year in its worst recession driven by the coronavirus pandemic.

Respondents to the MAS survey also projected GDP to grow by 3.8 per cent in 2022, with high probability of expansion coming within the 3 per cent to 3.9 per cent range.

For 2021, construction was seen as the sector that will expand the most.

The median forecasts for construction came at 22.5 per cent, followed by accommodation and food services at 11 per cent. However, estimates for both the sectors were lower than the previous survey in which construction was seen growing by 28.4 per cent and accommodation and food by 15 per cent.

Manufacturing was projected to grow by 4.7 per cent, more than the previous median estimate of 4.5 per cent.

Growth in private consumption for this year was estimated at 7.9 per cent, less than the earlier forecast of 8.5 per cent, but non-oil domestic exports growth was raised to 6.9 per cent from 4 per cent.

According to the survey, the containment of the Covid-19 outbreak – mainly due to an acceleration in the pace of inoculation globally – was the most frequently cited upside risk for Singapore’s growth outlook.

A total of 77.8 per cent of respondents listed Covid-19 containment as an upside risk to their forecast, while 61.1 per cent ranked it as the top upside risk.

About 50 per cent of the survey respondents identified stronger-than-expected manufacturing sector performance, driven, for instance, by robust global demand for electronics as an upside risk. That is higher than the 22.2 per cent in the previous survey.

The prospects of a resumption of unrestricted international travel and stronger-than-expected global growth were also cited as factors that could boost growth beyond the latest forecast.

On the flip side, a further deterioration in the Covid-19 situation, due to new outbreaks or delays in vaccine deployment, topped the list of downside risks to Singapore’s growth outlook, with 77.8 per cent ranking it as the most important risk.

About half of the respondents were also concerned about geopolitical risks, including those stemming from United States-China tensions.

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Meanwhile, 44.4 per cent of the forecasters in the survey cited downside risks related to an earlier-than-expected policy support pullback. Such a scenario may result in a premature tightening in global financial conditions and weaker demand due to fiscal consolidation.

Inflation, as measured by the consumer price index for all items, was forecast in the survey at 0.9 per cent in 2021, while MAS core inflation – that excludes volatile components of accommodation and private transport – was expected to come in at 0.7 per cent.

The forecast for CPI-all items inflation was up from 0.6 per cent in the December survey. The projection for MAS core inflation was up from 0.6 per cent as well.

As for the labour market, the respondents expect Singapore’s unemployment rate to reach 2.9 per cent at year-end, down from 3 per cent in the previous survey.

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