The analysts at Fitch Solutions have forecast a current account surplus of 19.6% of Singapore’s gross domestic product (GDP) in 2021, which could mark the largest surplus in over a decade.

The estimate, according to a Jan 21 report, represents a significant widening from the team’s estimate of 17.8% in 2020.

“Our view relies on the recovering regional economy and Singapore’s relatively proactive stance in lifting travel restrictions to buoy the goods and services balance,” says the team.

In 2021, the team at Fitch Solutions also expects Singapore’s goods trade balance to improve over the year, particularly in 2H2021 as economies are slated to recover during the period.

Economic recoveries, especially in Asia, are expected to be concentrated in 2H2021 as vaccinations progress.

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“Indeed, we believe, Asia will be among the fastest-growing regions in the world in 2021, with trade boosted by China’s strong momentum especially in 1H2021,” notes the team.


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“As China’s recovery trajectory suggests, regional demand for imported goods is likely to remain relatively stifled in the first half of the year as the recovery picks up pace. Thereafter, we expect consumer demand to pick up in 2H2021, when the recovery would have fed through more strongly to the labour market,” it adds.

According to the team, the region is estimated to grow by 7.6% in 2021 compared to 5.4% for the global economy.

Singapore’s exports are also likely to benefit from this upside to external demand.

Furthermore, Singapore’s unilateral opening of travel is likely to expand quickly in 2021 as countries around the world get access to the Covid-19 vaccine.

“As of the time of writing on Jan 15, Singapore has unilaterally opened itself to travellers from China, Taiwan, Vietnam, Brunei, Australia and New Zealand, waiving the requirement for arrivals from these economies to quarantine on arrival,” says the team.

“As a result, the value of services sold to inbound travellers is likely to outweigh purchases by outbound travellers, a dynamic that we believe will be further strengthened in 2021 with the World Economic Forum selecting Singapore as its destination instead of Davos where it has traditionally taken place,” it adds.

Meanwhile, the political uncertainty in Hong Kong is likely to see the financial services sector divert more operations and capacity to Singapore.

“Indeed, Singapore, on net, has been investing an average of 12.9% of GDP overseas between 1Q2010 and 1Q2020, mostly acquiring portfolio and other assets.”

“The emergence of the pandemic has decreased the amount of capital invested overseas since 2Q2020, while the relative resilience of the financial services industry has seen direct investment into Singapore remain strong resulting in a financial account surplus of just 1.1% of GDP. Net direct investment into Singapore dropped to its lowest level since 1Q2018 but remained substantial at 14.8% of GDP,” it adds.