As Singapore’s GDP outperformed expectations with a 1.3% y-o-y expansion in the 1Q2021, outperforming the Ministry of Trade and Industry’s (MTI) initial flash estimates of a 0.2% growth y-o-y, economists have mostly kept their GDP growth forecast estimates for the full-year in 2021 unchanged.


See: Singapore's GDP expands 1.3% y-o-y in 1Q21; MTI keeps 4-6% growth forecast for 2021


MTI, on May 25, announced that it has kept its own forecast of 4-6% unchanged for the FY2021. The ministry explained that it will review its figures again in August pending “more data” and “greater clarity” amid the uncertainties arising from the resurgence of Covid-19 cases.

Following the release of the figures on the morning of May 25, Jamus Lim, associate professor of economics at ESSEC Business School Asia-Pacific, called the upward revision a “positive and welcome surprise”, and estimates that figures in the 2Q2021 will potentially take a hit from the Phase 2 (Heightened Alert) measures.

That said, Lim predicts that headline growth in the 2Q2021 will still be positive given the low base effect in 2020, and that it would be “foolhardy to venture a prediction beyond 2Q2021 because of the enormous uncertainty over whether a new Covid-19-related shock might present itself”.

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“This is why I believe the government has refrained for revising their official growth forecast. That said, I am quietly optimistic that, conditional on no new restriction measures, we will fall on the upper end of the 4–6% range, with even a small possibility of a minor beat,” he says.

However, Lim estimates that the range of possible growth figures could be even wider between 3-7% due to the uncertainty of the Covid-19 situation.

“That said, it is worth noting that some of the extraordinary fiscal support from the government last year should be expected to take root and percolate through the economy more this year, which—all else equal—would set it up for a more durable recovery,” he says.

“It is worth keeping in mind that, even if we attain the upper bound of MTI’s forecast of 6%, our economy will still remain more than 2% below the level that would have prevailed, had we grown at the 2019 growth rate through till 2021. The logic of this is from the mathematical fact that a contraction of a certain per cent followed by an expansion of the same per cent does not return you to the original level,” he adds.

Going forward, Lim says the country could look towards “possible benefits from growth” in the rest of the world, especially China and the US, which have since seen recoveries to their economies.

“While we may expect their more domestically-oriented growth to generate less spillover effects than in past cycles, their strong performances will undeniably help buoy a small, open, externally-dependent economy such as Singapore,” he says.

Estimates have mostly kept their estimates unchanged...

On the back of the higher-than-expected 1Q2021 figure, economists from Bank of America (BofA) Securities, DBS Group Research, OCBC Treasury Research and UOB Global Economics and Market Research have kept their GDP growth forecast estimates for the full-year 2021.

The team of economists of BofA Securities saw the upgrade “as expected” due to the stronger performance in manufacturing & services.

BofA, which has the most optimistic forecast at an above-consensus growth estimate of 8%, sees an upgrade “likely” to come from MTI in August, and deems the economic outlook for Singapore to remain “bright”.

“While we acknowledge that a larger outbreak and tighter restrictions are indeed large risks, Singapore remains well placed to recover strongly given its links to external demand and good progress on vaccination (34% of population vaccinated with at least one dose and 25% fully vaccinated as of May 17),” writes the team.

“While total community cases have not come down decisively, the number of unlinked cases has been receding. Mobility has expectedly taken a hit, but is still much higher than during last year's circuit breaker. Sustained growth in external sectors will also help to provide a cushion against the expected decline in domestic activities,” it adds.

However, the team acknowledges that the economic recovery in Singapore is likely to be “uneven” despite the overall strong growth “due both to the sustained outperformance in the external sectors and the setback to domestic services and construction from the recent measures”.

The BofA team also expects the S$NEER to remain “on the strong side” in 2021, but expects the Monetary Authority of Singapore (MAS) to only formally tighten its policy in April 2022.

Irvin Seah, senior economist at DBS, says the Singapore economy is “on track” to meet his existing growth forecast of 6.3% for the 2021 for now. That is, unless the government introduces new stiffer measures, or extends the Phase 2 (Heightened Alert) period, depending on the Covid-19 situation.

The current measures is, however, likely to see a “sequential pullback” on the growth performance of GDP in 2Q2021, though the headline growth may see a “strong double-digit expansion” of about 14% y-o-y due to the low base from the CB period.

The “impact [of the q-o-q decline in 2Q2021] will be partially offset by the stronger than expected performance in the first quarter”,” says Seah.

“The current one-month duration of the P2HA, as well as the nature of the measures also imply a limited impact,” he adds.

In his report on May 25, Seah says he remains “sanguine” on the country’s outlook for the manufacturing sector, although he estimates that a slower growth on the sector may be on the horizon.

“Industrial output for March came in at 7.6% y-o-y compared to an implicit assumption of -3.4% in the advance estimates,” he writes.

“However, recent exports and PMI numbers are suggesting a slowdown in momentum. This is consistent with our long-held view that the earlier robust pace of expansion in manufacturing will make way for a more sustainable pace going forward,” he adds.

In addition, Seah expects global demand for high end electronics parts and components to “remain strong” moving forward, but sees the existing supply shortage, specifically in semiconductor chips, to “pose a hindrance to achieving higher pace of expansion… in the near term”.

The manpower crunch in construction is likely to weigh the sector down in the coming months, while the services sector is expected to see a pullback in the 2Q2021 on the back of the Phase 2 (Heightened Alert) measures, adds Seah.

OCBC Treasury Research’s head of research and strategy Selena Ling, who called the 1.3% y-o-y expansion a “pleasant upside surprise”, has maintained her 2021 GDP growth forecast at 6.0% y-o-y with a base of 5.5% after factoring the “setback” that is the Phase 2 (Heightened Alert) measures.

While she agrees that the 2Q2021 will bring about softer growth print, like Seah, Ling estimates the headline growth will see a double-digit y-o-y expansion due to the low base in 2020.

“The key question is whether the Covid situation and tightening measures get prolonged into 3Q2021, both for the region and Singapore, as well as whether the manufacturing sector continues to hold up,” she writes.

“The domestic labour market, especially the unemployment rate, had stabilized towards end-2020 and early 2021, but the risk is that it hits a temporary speedbump due to the uptick in Covid cases and tightening of restrictions,” she adds.

On the unchanged estimates put out by MTI, Ling says authorities can afford to “wait and see” for the time being and reassess the situation over the next one to three months.

“There is no rush to recalibrate monetary policy settings at the October monetary policy statement (MPS) since core CPI remains comfortably within the 0-1% official forecast range, even as headline CPI is buoyed by low base effects and rising commodity prices,” she notes.

That said, that could be calls from the ground for the government to provide more support measures for the industries that have been hit hard by Covid-19, should the situation remain unchanged as at May 25.

“As such, additional fiscal measures remain an option on the table and it is plausible that some existing measures like the jobs support scheme (JSS) for Tier 1 industries and the Temporary Bridging Loan etc are extended further, but a more targeted approach is likely to remain the main state of play this year,” she says.

UOB economist Barnabas Gan, like the rest of the economists, has kept his full-year 2021 growth outlook at 5.5%, in line with MTI’s estimate of 4-6%.

His estimate comes as Singapore’s externally-oriented sectors such as manufacturing, wholesale & retail trade and financial services “should continue to support economic growth for the year ahead”, the same sectors that contributed to the better-than-expected 1Q2021 GDP figures.

To this end, Gan has estimated that overall services should grow by 4.7% y-o-y in 2021, led by the wholesale & retail trade “which is expected to bounce back from its contraction pace of 3.7% in 2020, to 5.6% growth in 2021”.

“Financial services have also been relatively insulated from the COVID-19 pandemic with a 5.0% growth in 2020, and is likely to further expand by 7.0% in 2021,” he predicts.

While Singapore’s labour-intensive clusters remain in the “doldrums”, Gan estimates that the construction sector should print a “slow but positive growth rate” of 1.1% in 2021 on the low-base effect in 2020 and the “relatively low Covid-19 infection rate” among Singapore’s migrant workers to-date.


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That said, the Covid-19 situation remains uncertain at this point, and if the Phase 2 (Heightened Alert) measures do not end on June 13 as scheduled, “growth headwinds may intensify,” he writes, which could further impact Singapore’s domestically-oriented industries such as retail, food & beverage, construction and marine & process sectors.

Gan has also estimated a slowdown in Singapore’s growth trajectory in the 2Q2021, with the construction and services sectors, as well as the food & beverage cluster being the most impacted.

RHB Group Research's team of economists have kept its GDP forecast of 5.8% y-o-y as well.

"The stronger than expected 1Q2021 GDP and good progress in the domestic vaccination rollout will tilt our forecast to the upside but the current implementation of Phase 2 (Heightened Alert) may dampen our prospects of a greater recovery pace," writes the team in a May 25 report.

CGS-CIMB Research economists Michelle Chia and Terence Lee has also kept their GDP forecast of 5.3% y-o-y for the time being.

Except for some...

However, there are downgrades too. For one, JP Morgan has lowered its growth estimate for full-year 2021 GDP growth to 7.0% y-o-y, from 7.8% y-o-y, on the back of the tightening measures and reversion to Phase 2 (Heightened Alert).

JP Morgan economist Ong Sin Beng has also tweaked his estimate for the 2Q2021 to -5.0% q-o-q from 5% q-o-q. He has, however, increased his estimate for the 3Q2021 to mark a 6% q-o-q growth, from 5% previously.

“These measures, which started to tighten in mid-May are expected to be relaxed in mid-June onwards and should be reflected in a gradual normalisation of private consumption,” he writes.

“However, cross-border travel restrictions, especially for foreign migrant workers, are expected to remain stringent, with their knock-on effects on the construction and other industries reliant on foreign workers,” he adds.

As it stands, the easing of cross-border travel is likely to be delayed further.

“Thus, the broader macro narrative of a variegated recovery, with manufacturing benefitting from external demand amid weakness in the non-tradeable sectors remains a key driver of the patchy recovery that is underway and apparent also in the 1Q2021 GDP outturn,” says Ong.