MAS: Economy may grow more than 6% but recovery to remain uneven

Singapore — The Singapore economy is expected to grow faster than forecast in 2021 despite one of the worst recessions in 2020.

The gross domestic product (GDP) “is projected to exceed the upper end of the official 4–6% forecast range”, says the Monetary Authority of Singapore’s (MAS) Macroeconomic Review for 2021 released on Thursday (Apr 28).

This projected recovery is supported by healthy expansions in trade-related industries, the manufacturing sector and water transportation segment.

However, MAS reports that growth outcomes will remain disparate across sectors. While prospects have brightened for manufacturing industries, the prognosis remains weak for the construction sector as well as consumer-facing and travel-related industries.

“A stronger-than-expected upturn of the global electronics cycle could further boost growth, but the recovery could also be derailed if vaccination schemes turn out to be less effective than expected, leading to recurrent and widespread virus outbreaks around the world.” the report stated.

The report noted that some pre-Covid trends remain – a shift in global economic weight to Asia, and an increased emphasis on sustainability and a green recovery. New opportunities have also emerged, it added. Increasingly, more global firms organise their production and supply chains towards resilience rather than efficiency, and more businesses and consumers are adopting digital and technology-enabled alternatives.

With regard to the monetary policy, MAS maintained the zero per cent per annum rate of appreciation of the S$NEER policy band in April 2021. An accommodative monetary policy stance remained appropriate as core inflation would stay low. Core inflation was expected to rise gradually from its current subdued levels but still keep below its historical average.

The report also touched on Budget 2021, noting that it was extending and building upon the unprecedented fiscal support of the previous year. There was further targeted assistance provided to vulnerable sectors and households amid the continuing drag from the pandemic.

Taken together, the complementary monetary and fiscal policies this year will help entrench the ongoing recovery, while ensuring price stability and sustainable growth in the medium term.

The global economy is projected to reach its end-2019 level of output by the second quarter of 2021 and expand by 6.2 per cent for the year as a whole.

Still, the pandemic continues to present significant uncertainties to the global economy’s path to normalisation. Minister of Trade and Industry Chan Chun Sing encourages companies and workers to press on with their transformation and upskilling journey. This would allow them to strengthen their competitiveness and resilience in the future economy.

“I am glad that many of them have taken proactive steps to do so. The Government remains committed in supporting our companies and workers in this journey, as we work to emerge stronger from this crisis and build a stronger economy together.” he writes, noting the importance of recovery from the pandemic.

Denise Teh is an intern at The Independent SG. /TISG