Singapore raises 2021 GDP estimate, now expects growth of 6%-7%

Singapore’s economy is set to expand at a faster clip than the government previously expected as the city-state shakes off an uptick in virus cases and looks to re-open more sectors through year-end.

Singapore revised its forecast for annual economic growth to 6%-7%, the Ministry of Trade & Industry said Wednesday as it reported final second-quarter data. In its initial second-quarter GDP report last month, the agency had left the annual forecast unchanged at 4%-6%.

Among nine economists surveyed by Bloomberg who updated their Singapore GDP forecasts this month, six saw growth exceeding 6%.

“Barring a major setback in the global economy, the Singapore economy is expected to continue to see a gradual recovery in the second half of the year, supported in large part by outward-oriented sectors,” the ministry said in a statement accompanying the data. “The progressive easing of domestic and border restrictions as our vaccination rates continue to rise will also help to support the recovery of our consumer-facing sectors and alleviate labor shortages in sectors that are reliant on migrant workers.”

Singapore has remained a relative bright spot in Southeast Asia as the delta variant rips across the region, severely threatening economies that are struggling to boost their vaccination rates. Thailand reported a record high in daily virus deaths Tuesday, with Malaysia also recently setting new daily case records.

The Singapore dollar was largely unchanged after the data, at 1.36 to the U.S. dollar as of 8:37 a.m.

Singapore has fought some pockets of the delta variant over the past few months, but officials have allowed for further easing of restrictions given the city-state’s vaccination rate, with 70% of the population now fully inoculated. In a speech Sunday night on the eve of the country’s 56th independence day, Prime Minister Lee Hsien Loong said residents could “look forward to a careful, step-by-step re-opening of our economy.”

What Bloomberg Economics Says...

“Singapore’s smaller second-quarter contraction and brighter outlook for 3Q boost the economy’s prospects for 2021 -- presenting upside risks to our forecast for 6.2% growth in 2021. With 70% of the population fully vaccinated earlier than targeted, the government already started to peel back virus curbs on Aug. 10, and will further ease restrictions on Aug. 19. Activity should gain significant momentum once herd immunity is reached in early September, allowing full reopening.”

-- Tamara Mast Henderson, Asean economist

The stronger GDP forecast is based on the assumption that the city-state’s vaccination rate will continue to improve from the current 70%, and that its borders will gradually reopen toward the end of the year, according to the Trade and Industry Ministry.

A faster reopening and relaxation of virus curbs in the third quarter “could bode well for consumer spending and hence domestic-oriented services,” said Selena Ling, head of research and strategy at Oversea-Chinese Banking Corp. in Singapore. “What would be key is the recovery in the domestic labor market and the 2022 core CPI expectations that could pave the way to monetary policy normalization.”

Edward Robinson, deputy managing director and chief economist of the Monetary Authority of Singapore, told reporters after Wednesday’s data release that “the current monetary policy stance” -- which aims for no appreciation of the Singapore dollar against a basket of currencies of its trading partners -- “remains appropriate for now.”

The government on Wednesday also published final GDP estimates for the second quarter, which showed the economy contracted 1.8% from the previous three months on a non-annualized, seasonally adjusted basis, slightly better than the -2% median estimate in a Bloomberg survey. That compares with the ministry’s advanced reading last month of a 2% contraction in the April-to-June period, when fresh mobility restrictions weighed heavily on the food and beverage and retail sectors, while tourism-related businesses continued to struggle.

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

On a year-on-year basis, economic growth was reported at 14.7%, comparing favorably with a disastrous second quarter in 2020, the data Wednesday showed. The median in the Bloomberg survey was for 14.2% expansion, after the government’s earlier estimate had shown 14.3% growth.

More details from the report:

• Manufacturing shrank 2.5% quarter-on-quarter, and expanded 17.7% year-on-year
• Construction contracted 7.6% from the previous quarter, and grew 106.2% from the year earlier
• Food & beverage grew 36.7% year-on-year, and contracted 8% from the prior quarter