Singapore economy en route to recovery, but growth set to be uneven

Singapore's economy is well on its way to recovery and almost back to pre-pandemic levels, even if growth momentum has eased in recent months.

But while the overall economic picture looks rosier, growth across sectors could be more lopsided than previously forecast, the Monetary Authority of Singapore (MAS) said in its biannual macroeconomic review released yesterday.

The prospects for sectors less affected by the coronavirus have become brighter, and the prognosis for the worst-hit industries has become more grim amid the global surge in cases and diminished hopes of widespread opening of international borders.

At the same time, labour market conditions have continued to improve, with employment growing in the first quarter.

The central bank said Singapore's economic growth is likely to top 6 per cent this year, surpassing the upper end of the 4 per cent to 6 per cent official growth forecast, barring a significant setback in activity from a weaker recovery of the global economy or a surge in locally transmitted cases. But it cautioned that this robust estimate belies the continued unevenness in economic recovery.

Real gross domestic product reached 99.6 per cent of its pre-pandemic level by the first quarter of this year, and the economy as a whole had almost recouped the output lost in the first half of last year. Global growth could also pick up speed from the second quarter of the year.

The healthier economy has rubbed off on the labour market, with total employment growing for the first time since the start of the pandemic in the first three months of the year. This was driven by the services sector's hiring of residents.

The unemployment rate, which peaked at 3.5 per cent overall in September last year, eased to 2.9 per cent for last month, continuing a downward trend from January's 3.2 per cent.

For residents, the rate fell from 4.3 per cent in January to 4 per cent last month. It declined from 4.5 per cent to 4.2 per cent in the same period for Singaporeans.

UOB economist Barnabas Gan said the unemployment rate could fall further to 2.6 per cent in the fourth quarter of this year. The services sector is likely to see higher labour demand in the quarters ahead given the improved domestic economic environment, he added, but the construction sector could continue to face labour supply restrictions from Covid-19 risks across parts of Asia.