The announcement of Singapore’s full-year economic contraction of 5.4% in 2020 has been well received by economists. 

The full-year contraction – which is an improvement from the 5.8% plunge predicted in advance estimates -  follows a milder dip of 2.4% y-o-y in 4Q2020. 

See: Singapore's economy contracts by 5.4% in 2020; expected to grow by 4% to 6% in 2021


This follows the Phase 3 of Singapore’s re-opening on Dec 28, which saw consumers normalizing expenditures particularly in food & beverages and other services which includes recreational services, observe CGS-CIMB’s economists Michelle Chia and Lim Yee Ping.

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The duo expect the recovery momentum in Singapore’s economy to sustain in 2021.

Their prediction is for full-year economic growth to come in at 5.3% this year, within the 4% to 6% range forecast by the Ministry of Trade and Industry (MTI)

This will be driven by the Covid-19 immunisation efforts, further normalisation in economic activities and stronger external demand, add Chia and Lim.

Economists from RHB’s Singapore research team are expecting a full-year GDP growth of 5.5% y-o-y, in line with the Bloomberg consensus forecast.

However, they are looking at a 1.3% y-o-y contraction in 1Q2021. This is as private consumption and capital formation will remain weak and will offset growth in net exports and government consumption expenditure, they explain.

“In terms of gross fixed capital formation, we expect growth to remain muted for 1Q2021,” they add.

Meanwhile, the economists predict that investment spending in the construction sector - which contributes to almost 40% of total investments - will likely remain low. 

This is activity levels in worksites are slated to remain low given the need for safe management measures and the drop in contracts awarded last year.

However, the economists are optimistic of better investment spending in machinery and equipment, and intellectual property products to improve slightly in 1Q2021 due to better prospects of the manufacturing sector.

As for exports, they – like Chia and Lim – anticipate robust growth due to strong and continued global demand for semiconductor from 5G and automotive markets.