SINGAPORE: Singapore’s recovery from the Covid-19 recession is likely to be “gradual and uneven, ” with firms and households restraining spending and a recent bounceback in industrial output likely to taper off in coming months, according to its central bank.
While some economies, including Singapore’s, are showing signs of healing in the third quarter, “the near-term rebound is expected to fade to an incomplete recovery, ” the Monetary Authority of Singapore said in its biannual Macroeconomic Review yesterday.
The city-state’s labour market is expected to “only expand gradually” next year.
“Some pockets of the economy may not recover to pre-pandemic levels even by the end of next year, ” the MAS said, noting that Singapore’s travel-related and contact-intensive services are likely to remain depressed.
“Firms and households will continue to be restrained by income loss and increased uncertainty, and will therefore hold back on investment and discretionary spending.”
The MAS still projects the local economy to contract 5% to 7% this year, reaffirming the Trade and Industry Ministry’s forecast.
Singapore has unleashed about S$100bil (US$73.5bil) in fiscal stimulus to combat the impact of the pandemic, including short-term aid like wage subsidies and rent relief as well as longer-term efforts to digitise business and retrain retrenched workers.
About half of the stimulus is set to be funded from past reserves, an unusual move for the fiscally conservative city-state.
Officials are confident Singapore has already suffered the worst of the economic blow, but anticipate more retrenchments, bankruptcies and non-performing loans through early next year.
They have signalled that more stimulus will be needed as the economy emerges from the worst downturn since the country’s independence more than a half-century ago.
Globally, the recovery will be “partial and protracted, ” weighing on trade-reliant Singapore more than any recession before, the central bank said.
Accommodative monetary and fiscal policy will bolster economies this year and monetary policy should remain lenient in coming quarters, while countries’ fiscal policies are likely to turn contractionary next year, the MAS said.
The pace of recovery worldwide “is not expected to be sufficient to close the negative output gaps opened up by the Covid-19 recession, even by the end of 2021, ” it said.
“The course of the pandemic is highly uncertain, but it seems likely that activity will continue to be hampered by recurrent localised outbreaks of the virus, and the imposition of associated movement restrictions, for some time.” — Bloomberg
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