MAS survey: Economy to contract 6% this year, before rebounding 5.5% in 2021

10 Dec 2020

A further deterioration in the COVID-19 pandemic continued to top the list of downside risks to the economy. It is followed by concerns on insufficient stimulus as well as the escalation in US-China trade tensions, noted CNA.

A Monetary Authority of Singapore (MAS) survey showed that private sector economists had maintained their 6% contraction forecast for the economy this year from the previous survey conducted three months ago, reported Channel News Asia (CNA).

The central bank’s latest quarterly survey showed that the economy is expected to decline 4.5% year-on-year in the fourth quarter of 2020, following a smaller-than-expected drop of 5.8% during the third quarter.

The economists also held on to their earlier forecast of a rebound for 2021, predicting a 5.5% growth. The figure is in line with the government’s forecast of between 4% and 6% expansion for next year.

The MAS survey, which was sent out on 23 November, received 23 responses from private sector economists. MAS noted that the findings of the survey do not reflect the views of the central bank.

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In terms of a full-year outlook for the key macroeconomic indicators, the manufacturing sector had the biggest upgrade, with the economists forecasting a 5.8% growth. This is an improvement from 2.3% during the last survey.

The economists see smaller contractions for the accommodation and food services as well as the wholesale and retail trade.

The forecast for construction, however, was gloomier. The sector is predicted to shrink by 36.2% for 2020, down from 23% in the previous survey.

Another sector that was downgraded was private consumption, which is expected to decline 13.4% versus the 11.8% decline forecasted previously.

Growth forecasts for non-oil domestic exports as well as finance and insurance were also trimmed.

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Meanwhile, Singapore’s unemployment rate is expected to hit 3.7%, up from 3.5% in the previous survey.

A further deterioration in the COVID-19 pandemic continued to top the list of downside risks to the economy. It is followed by concerns on insufficient stimulus as well as the escalation in US-China trade tensions, noted CNA.

Conversely, the economists list the pandemic’s effective containment via the global deployment of a vaccine as the top upside driver. Others include fiscal stimulus to support the economy, reopening of borders to international travel and a stronger-than-expected performance of the manufacturing sector.

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