MAS: Economic recovery will take longer this time
Some sectors not expected to bounce back even by end of 2021
The Monetary Authority of Singapore (MAS) said yesterday that the country's economy is likely to take longer to recover from the Covid-19 crisis than it did in past recessions.
Citing a drop in earnings for businesses, lower incomes for households, and greater uncertainty that restrain spending and investment, the pace of recovery is expected to moderate in the quarters ahead, the central bank added in its twice-yearly macroeconomic review released yesterday.
LONG ROAD BACK
Some pockets of the economy are not expected to recover to pre-pandemic levels even by the end of next year.
Citing the travel-related sector and some contact-intensive domestic services, MAS said activity "could still fall short of pre-pandemic levels until health risks abate".
In its report, MAS noted the Covid-19 pandemic has disproportionately hurt domestic-oriented and travel-related services, such as food and beverage, retail, construction, aviation and hospitality.
As these sectors have stronger inter-linkages with local firms and households, they have had a more severe impact locally, especially on jobs and consumption.
The unemployment rate among Singapore residents is likely to remain high next year, keeping wage growth low.
This is unlike the 2008 global financial crisis, when the rate returned to pre-crisis levels after six quarters.
The projections for the labour market are despite employment prospects looking up in the immediate term in the retail, and food and beverage sectors, and in support services such as cleaning and security industries.
These business areas rebounded quickly with Singapore exiting the circuit breaker in June, said MAS.
In construction, the gradual resumption of activities in the second half of this year would also likely lead to more hiring.
The extended Jobs Support Scheme, albeit at reduced levels, as well as the newly introduced Jobs Growth Incentive, should encourage the creation of new jobs in sectors that have brighter prospects, such as information and communications technology, cyber security, biomedical sciences, e-commerce, health and social services, and financial and insurance services, MAS said.
MAS reiterated the Government's forecast for the economy to shrink by a record 5 per cent to 7 per cent this year.
Next year, the economy is expected to post growth that is higher than the average in the past several years, but that is because of the effects of the low base this year, it added.
Noting the unprecedented intensity of the Covid-19 recession, MAS said it resulted in a cumulative 14 per cent drop in gross domestic product from pre-crisis levels to the trough in the middle of this year. This compares with an average contraction of 6.1 per cent in previous recessions. - THE STRAITS TIMES