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Economy

Singapore's GDP shrinks record 5.8% in 2020

Q4 contraction slows to 3.8%, setting stage for rebound in 2021

Spectators watch a light show on New Year's Eve in Singapore. The city-state suffered its worst economic year in 2020.   © Reuters

SINGAPORE -- Singapore's gross domestic product shrank 3.8% in the October-December quarter from a year earlier, according to preliminary data released on Monday, marking the fourth straight quarterly decline amid the COVID-19 pandemic.

This brings the city-state's full-year contraction for 2020 to 5.8%, versus 0.7% growth in 2019. This is the worst result since independence in 1965, below the 2.2% contraction recorded for 1998 during the Asian financial crisis.

Data from the Ministry of Trade and Industry shows the services sector shrank 6.8% in the fourth quarter, while the manufacturing sector grew 9.5% and construction contracted 28.5%.

The growth of the manufacturing sector was "supported primarily by output expansions in the electronics, biomedical manufacturing and precision engineering clusters," the ministry said in a statement.

As a small country that relies heavily on external demand, Singapore has been hit hard by the pandemic. Its GDP fell 0.2% in the first quarter, before plunging 13.4% in the second term and 5.6% in the third.

While some industries saw signs of recovery, others continued to suffer. The ministry said that the wholesale trade segment shrank in the fourth quarter due to weak external demand, while the food services sector was "weighed down by constraints arising from the implementation of safe management measures," as restaurants reduced seats to have more space between dine-in customers.

Now Singapore hopes to turn a corner in 2021.

Thanks to a range of health measures, the coronavirus is largely under control domestically, with daily cases totaling around 10-30 recently. On Dec. 28, the government eased restrictions, allowing social gatherings of up to eight people, instead of only five. And on Dec. 30, it launched a vaccination campaign, starting with health care workers.

Apart from rolling out vaccines, Singapore hopes to buoy the economy with initiatives such as quarantine-free "travel bubbles" as well as what it calls a "business travel exchange" for in-person international meetings. The air transport and hotel sectors continued to shrink in the fourth quarter due to the lack of tourism demand.

In November, the government projected a growth rate of 4% to 6% for 2021. A December survey by the Japan Center for Economic Research and Nikkei pointed to 4.5% growth in Singapore for the year.

The next focus will be on what fiscal support measures are included in the 2021 draft budget, expected in February.

"After our most severe downturn since independence, we look forward to a rebound in 2021, although the recovery will be uneven, and activity is likely to remain below pre-COVID-19 levels for some time," Prime Minister Lee Hsien Loong said in his New Year's message.

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