SINGAPORE -- The Singaporean government expects a return to solid growth next year, officially forecasting gross domestic product to expand in the 4% to 6% range in 2021 after this year's third quarter turned out better than initially thought.
Nevertheless, officials from the Trade and Industry Ministry cautioned on Monday that the recovery will be "gradual," as they narrowed their projection for 2020 to a band of -6.5% to -6%, versus the previous -5% to -7%.
COVID-19 has set Singapore on course for its poorest economic performance in its 55 years of independence. Officials said GDP shrank 5.8% on the year in the July-September period, better than the 7% contraction seen in preliminary figures released last month. Yet, this still marked a contraction for the third straight quarter amid the pandemic.
On a quarter-on-quarter basis, the economy grew 9.2% in the third period -- an improvement from the April-June months, when many workplaces were closed to stem virus transmissions.
The economy had plunged 13.3% on the year in April-June -- the worst result on record.
Officials on Monday warned that the path to recovery is likely to be "slow and uneven across economies," with many unlikely to recover to pre-COVID levels until the end of 2021. In Asia, they said China is expected to maintain robust growth, supported by strong investment.
Within the Association of Southeast Asian Nations, key economies are expected to pick up alongside an improvement in global economic conditions, the officials added.
"Notwithstanding positive news on vaccine development, as well as advancements in therapeutics and testing, the risk of a periodic resurgence of infections around the world remains," said Gabriel Lim, permanent secretary for trade and industry, at an online briefing on Singapore's GDP results.
"The re-imposition of lockdowns, even in a limited way, could dampen business and consumer confidence, and pose a drag on the global economic recovery."
A closer look at Singapore's latest figures reveals patchy signs of recovery from the worst effects of the health crisis. In the third quarter, after an economic shutdown that lasted over a month, the manufacturing sector grew 10% on the year -- a sharp reversal from the 0.8% contraction in the previous quarter.
The business services industry shrank 15% year on year in July-September, however, following a 21% decline in the previous three months. The construction sector contracted 47% on the year, compared to a 60% decline seen in the April-June period.
"Looking back, it has been a bruising year for everyone," Trade and Industry Minister Chan Chun Sing told the media on Monday. "When news of the virus first broke almost a year ago, few would have imagined we would still be fighting the virus today. Even fewer would have imagined the devastation brought on economies around the world."
Chan noted that total employment continued "to contract in the third quarter of 2020. We lost about 26,900 jobs, but at a significantly slower pace as compared to the previous quarter, where the total employment reduced by about 103,000."
Singapore's confirmed COVID cases are creeping toward the 60,000 mark, after thousands of infections surfaced in densely packed dormitories housing migrant workers earlier in the year. But this has been largely contained, with no cases emerging locally in recent days.
As a regional trade and transport hub, the city-state has also been hit hard by global travel restrictions, and has sought to negotiate bilateral "travel bubbles" with other destinations in Asia. But in a blow to these efforts, a travel arrangement with Hong Kong that was supposed to begin on Sunday was deferred for two weeks after the China-ruled city saw a jump in coronavirus cases.
Lim on Monday acknowledged the disappointment but stressed: "The impact to GDP [of] a single air travel bubble -- there's obviously some positive impact, but it isn't very, very, very, large mainly because Hong Kong is an important partner to us, but it's not one of our top three, for example, or even top five, trading partners."
Lim added that a broader reopening of air travel "would certainly make a much bigger and more material difference," but said this depends on each country's ability to manage the virus. Singapore has begun to allow general visitors from certain low-risk countries, and has set up "green lane" arrangements for business travelers from China, Japan and South Korea.
Meanwhile, the Monetary Authority of Singapore on Monday kept its monetary policy unchanged.
The city-state's policy is based on exchange rates, whereby the Singapore dollar is managed against a basket of major trade partners' currencies. In March, the central bank eased policy to help sustain the economy, by reducing its target appreciation rate to 0%, while re-centering the exchange rate band downward.
"The decision had already taken into account plausible, sort of, alternative, scenarios or outcomes," said Edward Robinson, deputy managing director at the central bank during the Monday briefing. He described a continuing "support impulse from monetary policy and fiscal policy flowing through to the economy," and pledged to continue monitoring conditions "very carefully."