Monetary Authority of Singapore: 2021 outlook dims for sectors worst-hit by Covid-19 but brightens for less affected ones

Singapore’s economy is expected to exceed the official 4–6 per cent forecast, but prospects for sectors worst-hit by the Covid-19 pandemic has worsened. — TODAY pic
Singapore’s economy is expected to exceed the official 4–6 per cent forecast, but prospects for sectors worst-hit by the Covid-19 pandemic has worsened. — TODAY pic

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SINGAPORE, April 28 — Even though Singapore’s economic growth this year is expected to exceed the official four to six per cent forecast, the outlook for sectors worst-hit by the Covid-19 pandemic has deteriorated. 

The worsening prognosis for these sectors, which include aviation and tourism, comes amid a global surge in Covid-19 cases and the emergence of more contagious strains of the virus, diminishing hopes of international borders reopening substantially in the near future, said the Monetary Authority of Singapore (MAS) today.

“The projected growth outcomes across sectors have become more disparate than previously envisaged,” the central bank said in its bi-annual macroeconomic review.

“The prospects for sectors less affected by the crisis, especially manufacturing, have improved. Meanwhile, the prospects for the worst-hit sectors such as air transport and accommodation has deteriorated somewhat.”   

This essentially means Singapore will likely see an even more uneven recovery path — which economists have termed as a “K-shaped recovery” — in 2021. 

‘Serious impairment’ for aviation firms

In particular, the MAS report highlighted how the setback to the aviation industry could be long-drawn, with firms facing “serious impairment”. 

According to the International Air Transport Association, global passenger traffic could hit 50 per cent of pre-Covid levels by the end of this year and return to 2019 levels only in 2024. 

MAS said things in Singapore are likely to follow suit, with air passenger traffic only reaching pre-pandemic levels in 2024. 

“Singapore’s air transport industry is expected to continue operating at less than half of pre-Covid-19 levels even by year-end,” said MAS in its report. 

Global travel is still likely to remain weak in 2021, as governments remain cautious about the reopening of borders amid the resurgence of virus variants. 

MAS said leisure travel is expected to rise only gradually in the second half of this year, even if the IATA travel pass scheme leads to more borders reopening. 

The IATA travel pass is a mobile mobile app that helps travelers store and manage their verified certifications for Covid-19 tests or vaccines.

Singapore has recently announced that it will kick off its travel bubble with Hong Kong on May 26 and is discussing to set up similar travel bubbles with Australia and Taiwan.

However, business travel is expected to resume more slowly as companies have adapted to virtual meetings, which MAS believes is a behavioural shift that will likely be lasting.

While domestic tourism can provide a “thin lifeline” for accommodation, as well as the arts, recreation and entertainment sectors, MAS said the revenue from such a short-term pivot will not be enough to compensate for the losses incurred due to the decimation of international travel. 

Improvement in retail and F&B

Consumer-facing businesses, such as retail and food and beverage, will be bolstered by improving consumer sentiments as the labour market improves, said MAS. 

While the lack of tourist spending has affected their sales, the closure of international travel also means that residents, who would have otherwise spent their money overseas, are now spending it domestically. 

However, MAS said growth in these sectors is unlikely to pick up in the coming quarters. Besides the lack of tourists, F&B outlets are also held back by capacity limits that are put in place to curb the spread of the coronavirus. 

Construction backlog

MAS expects growth in construction to pick up in 2021 given that a backlog of projects have emerged due to numerous delays last year. 

The number of construction contracts awarded is also expected to increase in the coming quarters. These projects include public housing projects and major public infrastructure projects. 

However, MAS said manpower shortages in this sector will persist, as about 50,000 construction workers, amounting to 12 per cent of the workforce in the sector, were laid off last year. 

Manpower shortage and rising global material costs will increase construction costs and tender prices this year. 

This may cause some firms to put some projects on hold, and hence, output is expected to remain below pre-Covid levels in 2021. 


A supply shortage of semiconductor chips will boost production in Singapore’s electronics cluster this year, with 5G technology in smartphones and base stations being widely rolled out and as demand for tech products go up with many continuing to work from home. 

MAS said this will also benefit the precision engineering cluster as it builds production equipment and ancillary inputs for semiconductors. 

Global and Singapore outlook for 2021

While global recovery has been set back as governments reintroduce lockdowns or other public health measures to stem the spread of the disease, MAS said the global economy is still projected to regain its level of output at the end of 2019 by the second quarter of this year and expand by 6.2 per cent this year. 

This is due to substantial fiscal stimulus by various countries such as the United States as well as a more rapid global rollout of Covid-19 vaccination programmes than expected earlier.    

MAS said Singapore’s economic growth this year is likely to exceed 6 per cent, barring any setback to the global economy or a surge in locally-transmitted Covid-19 infections. 

“The robust GDP estimate belies continued unevenness in the dispersion of the recovery and is accompanied by elevated uncertainty,” it added.

“Significant uncertainties remain, including the possibility of further virus mutations and premature relaxation of social restrictions by governments, which could derail the global and domestic recovery.” — TODAY

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