The Singapore economy is expected to see a recovery in 2021, alongside receding disinflation risk, but the recovery trajectory is expected to be gradual and uneven, according to the Monetary Authority of Singapore's (MAS).
The economy will take longer to recover than in past recessions as the Covid-19 pandemic has disproportionately weighed on certain sectors, MAS said in its biannual Macroeconomic Review, published on Wednesday.
Singapore’s GDP picked up in the third quarter of 2020, growing by 7.9 percent from the quarter before, after a sharp contraction in the previous quarter.
However, MAS said that beyond the immediate rebound, GDP growth momentum is likely to be modest against a sluggish external backdrop, persistent weakness in some domestic services and limited recovery in the travel-related sector.
Bumps Ahead
Firms and households will continue to be restrained by income loss and increased uncertainty, MAS warned, adding that there are still «considerable downside risks» to the growth outlook, such as a resurgence in infections or a weaker-than-expected recovery in external demand.
Some labor market slack will be absorbed as domestic activities resume, while core inflation is also expected to rise from its trough this year, but stay low next year, MAS said, reiterating its forecast for the economy to shrink by 5 to 7 percent for 2020.
