SINGAPORE -- Singapore on Wednesday upgraded its growth projection for this year to a range of 6% to 7%, from the previous 4% to 6%, with a roughly 70% COVID-19 vaccination rate enabling plans to gradually reopen more of the economy.
That would bring economic output for 2021 above the 2019 level. The city-state's economy contracted 5.4% last year.
Gross domestic product grew 14.7% on the year in the April-June quarter -- upgraded from the preliminary figure of 14.3% growth -- partly due to the low base last year, when most of the period was spent under a sweeping lockdown. The manufacturing sector expanded 17.7%, while the services sector grew 10.3% and the construction industry expanded 106.2%.
The quarterly growth pace compares to 11.8% in the Philippines, 7.1% in Indonesia, 6.6% in Vietnam, and 7.9% in China.
"The performance of the Singapore economy in the first half of 2021 was stronger than expected," the Ministry of Trade and Industry said. "The COVID-19 situation has also stabilized, with our vaccination program continuing to make good progress."
There is still a ways to go. Hiromasa Matsuura, a Singapore-based economist at Mizuho Bank, noted that the "household sector's recovery remains weak, compared to the corporate sector's recovery including exports," suggesting that domestic precautions and a weak labor market continue to weigh on the economy.
The government's statistics show private consumption expenditure in the second quarter was 13% lower than that of the fourth quarter of 2019, on a seasonally adjusted basis. Government consumption expenditure and net exports, meanwhile, were 14% and 15% higher, respectively.
Nevertheless, the ministry said, "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."
Inoculations are beginning to open more avenues. Singapore has fully vaccinated more than two-thirds of its 5.7 million population -- among the fastest rates in the world. Effective Tuesday, it eased some of its border control measures, allowing work pass holders to apply for entry into the city-state regardless of where they are traveling from.
Authorities also eased domestic safe distancing rules, allowing fully vaccinated people to dine at restaurants in groups of up to five.
"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," the ministry said.
The government expects further easing from next Thursday, in a step toward its new normal of "living with COVID."
"A higher proportion of our population is now better protected. We are in a more resilient position," Prime Minister Lee Hsien Loong said in a televised National Day speech on Sunday. "We can now look forward to a careful, step-by-step reopening of our economy."
Exports of semiconductors and pharmaceuticals are expected to help power the recovery for the rest of the year. "The recovery in external demand for Singapore for the rest of the year remains largely on track," the Trade Ministry said.
One potential downside risk will be continued virus crises in neighboring Association of Southeast Asian Nations members. "Recent severe coronavirus infection in [other] ASEAN countries would be a concern for Singapore's exports going forward," Matsuura said. Malaysia and Indonesia, both hard-hit, are among the city-state's major export destinations.
The tourism-related sector will also continue to suffer from the prolonged pandemic, especially as the more contagious delta variant rages across Asia and keeps governments on guard.