Singapore: Growth outlook unchanged despite tighter COVID measures – UOB

Economist at UOB Group Barnabas Gan reviews the latest COVID-19 measures implemented in Singapore and the impact on the growth prospects.

Key Quotes

“Singapore’s multi-ministry task force will further tighten social restriction measures effective 16 May 2021. The new measures, coined as Phase Two (Heightened Alert) will be in place until 13 June 2021.”

“First-order negative impacts will likely be on Singapore’s retail sector, especially the food & beverage industry.”

“We note that Singapore’s economy has shown signs of recovery in the first quarter of 2021. Based on the advance estimates by the Ministry of Trade and Industry (MTI), Singapore’s 1Q21 GDP expanded +0.2% y/y (+2.0% q/q sa), although we think that it may be upgraded to +0.9% y/y (+2.7% q/q sa) given the stronger-than-expected manufacturing growth in 1Q21.”

“Despite Singapore’s retail sector possibly seeing further negative effects due to the tightened measures, we note that other key growth pillars such as manufacturing (21.9% of GDP in 2020) and other major services clusters such as finance & insurance (14.3% of GDP), business services (13.0% of GDP), and information & communications (4.8% of GDP) may see little impact from the tightened measures.”

“While we projected little impact on Singapore’s GDP in 2021 from the initial announcement of Phase Two (effective 8 May), the further tightening of social distancing measures announced today will likely add some downside impact on Singapore’s retail sector, which in turn could inject marginal downside risk to our full-year GDP outlook of 5.5% in 2021, albeit transitory if the tightened measures last till 13 Jun and are subsequently relaxed. For now, we would prefer to hold our growth forecast at the 5.5%, until further clarity on how the COVID-19 situation evolves in the foreseeable future.”