SINGAPORE (Apr 30): The Monetary Authority of Singapore’s (MAS) latest take on the Covid-19 pandemic’s effect on Singapore’s economy makes for sombre reading. The global demand that so substantially shapes our prospects will contract sharply this year. That will compound the woes created by the stringent restrictions on social mingling here. There could be a fairly robust upturn next year, but even if much goes well, the world economy will probably still be below where it should have been without this pandemic shock. Moreover, the MAS warns that the risks are very much to the downside: The oil price crash is also hurting Singapore’s economy and tighter financial conditions around the world could trigger more stresses in the world economy. Singapore’s economic prospects are therefore “significantly diminished”.

The MAS assessment provides a good guide to what to expect for the economy. Our view is that the world economy might actually perform better than expected by the end of this year, which will help brighten Singapore’s prospects for a recovery in 2021, though not much is likely to help the city-state in the near term.

However, our greater concern is that the downside risks within the Singapore economy could turn out to be worse than anticipated: without policy support to deflect these risks, the parts of our economy which determine the welfare of most Singaporeans — small and medium-sized enterprises (SMEs) — may not benefit from the global recovery next year. We may get a situation where the headline GDP growth in 2021 might appear positive but too few Singaporeans actually feel the uplift.

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