The global economic outlook continues to be highly uncertain and will weigh on a small and open economy such as Singapore.
But the Southeast Asian country can continue to expect gross domestic product (GDP) growth of at least four per cent to six per cent this year, barring unforeseen circumstances, finance minister Lawrence Wong said on July 5.
Noting that the global outlook depends critically on the path of the pandemic, he said a faster-than-anticipated global vaccine roll-out and effective pandemic containment could boost growth prospects.
On the other hand, there are many downside risks, including the threat of new waves of infections, which could force a return to lockdowns in some jurisdictions, and a slower timeline for the reopening of borders, he added.
“As a small open economy, Singapore’s outlook depends crucially on these external developments. The uncertainty surrounding our economic outlook is therefore larger than usual.”
In May, the Ministry of Trade and Industry maintained its growth forecast for this year at a range of four to six per cent.
But the recovery will be uneven across sectors, Wong said.
Outward-oriented sectors, which account for about 70 per cent of the economy, are projected to benefit from the pickup in external demand.
The construction, marine and offshore engineering sectors are not short of projects, but they face a severe manpower crunch due to the Covid-19 restrictions.
While the government has provided foreign worker levy rebates and other support measures to help cushion the blow, these cannot fully make up for the shortage of workers, he said.
The finance minister observed that recovery will be more gradual in hard-hit sectors such as aviation and tourism, as it will take a longer time for international air travel volumes to return to pre-pandemic levels.
There may be some consolidation in these industries, he added, and the government will do its part to re-skill the affected workers and help them transition to other growing sectors that need manpower.
“At the same time, we will continue to provide targeted support for these industries to preserve their core capabilities and position them for recovery, which will come when travel restrictions are eventually lifted.”
One important part of the recovery process, he said, is the reopening of Singapore’s borders.
This is an existential issue for Singapore, because it survives and thrives on its ability to connect businesses and people to the region and the world.
Wong said there has been feedback from the business and investment community that Singapore might lose out to other hubs that are moving more aggressively to reopen their borders.
Singapore understands their concerns, he said, but is also very mindful that if it reopens prematurely before reaching high-enough vaccination rates, it could end up with another wave of infections, and a surge in hospitalisation and ICU cases.
“So our priority is to speed up vaccinations. And we have the ability to reach a very high level of vaccination coverage in the next one to two months,” he said.
“This will enable us to progressively reopen and reconnect with the world. We are already discussing with other jurisdictions that have effectively controlled the infection, working out travel corridors with them for vaccinated persons to travel more freely, either without the need for stay-home notice [SHN] or with a reduced SHN duration.”
Beyond the immediate term, Singapore is investing in new capabilities and building itself up strongly for the future – by accelerating digitalisation efforts, equipping workers with deep skills, investing in research and development, and creating new investments and jobs in the green economy, he said.
The foundations for all these were laid in previous Budgets.
The Emerging Stronger Taskforce – set up last year to chart Singapore’s economic recovery post-Covid-19 – has also set out many useful recommendations to better position Singapore for future growth, he added.
“To achieve these goals, we will need strong partnerships across the community, private, and public sectors.
“Our experience throughout this pandemic has shown that we are stronger and more effective when we are united and work together,” Wong said.
THE STRAITS TIMES (SINGAPORE)/ASIA NEWS NETWORK