People gather to photograph Apple Inc's iconic Marina Bay Sands store with the financial district in the background on the opening day of the store in Singapore on Sept 10, 2020. (BRYAN VAN DER BEEK / BLOOMBERG)

Singapore said its economy will probably expand 4 percent to 6 percent next year amid a global recovery from the worst of the coronavirus pandemic and as travel restrictions and local safety measures are eased.

On balance, given the improved growth outlook for key external economies, as well as a further easing of global travel restrictions and domestic public health measures that is expected in the year ahead, the Singapore economy is projected to return to growth in 2021.

Singapore's Ministry of Trade and Industry

The city-state also narrowed its forecast for this year’s contraction, the Ministry of Trade and Industry (MTI) said in a statement Monday, highlighting an improved outlook for manufacturing, driven primarily by electronics.

“On balance, given the improved growth outlook for key external economies, as well as a further easing of global travel restrictions and domestic public health measures that is expected in the year ahead, the Singapore economy is projected to return to growth in 2021,” MTI said.

Singapore’s revised forecast comes as recent breakthroughs in vaccine developments raise hopes the pandemic can be contained. Risks remain though, including fresh lockdown measures and premature withdrawal of policy support. Easing travel restrictions also won’t be straightforward, most recently seen as rising virus cases in the Hong Kong Special Administrative Region delayed the start of a much-anticipated travel bubble between the two Asian financial hubs.

“The bigger picture is dependent on the vaccine progress and how the recent global resurgence will hurt external demand and prospects for re-opening of international borders,” said Selena Ling, head of treasury research and strategy at Oversea-Chinese Banking Corp in Singapore. “Domestically-oriented services remain held at ransom by the Covid developments for now.”

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Singapore’s dollar was steady after the economic forecasts were published, trading 0.1 percent higher at 1.3422 against the greenback as at 9:35 am local time.

Singapore’s recovery depends greatly on factors outside its control, including the evolving US-China relationship, recurring waves of virus infection, and vaccine developments, Trade and Industry Minister Chan Chun Sing said in a briefing after the release.

“The path forward lies in greater interdependence, rather than independence or autarky,” he said of relations between the world’s two largest economies. “We do not yet know how the new US administration will approach its relations with China. But we hope both sides will dial down tensions, and return to a more open and inclusive global economic order.”

‘Support impulse’

Chan also cautioned that the excitement over vaccine developments recently might be misplaced, as “it will not be the quick fix that many expect it to be” with the manufacturing, distribution and application taking “many months, if not years.”

Edward Robinson, deputy managing director and chief economist at the Monetary Authority of Singapore (MAS), said monetary policy remains appropriate at this time, and that he expected the MAS would meet again as scheduled in April.

“There’s a continuing support impulse” from monetary and fiscal policy flowing through the economy, he said.

Revised outlook

For 2020, MTI revised its outlook to a contraction of 6 percent to 6.5 percent, narrower than the decline of 5 percent to 7 percent forecast earlier. It also said the economy shrank less than previously estimated in the three months through September. Gross domestic product declined 5.8 percent in the third quarter from a year earlier, according to final estimates released by MTI. That was better than the previous estimate of a 7 percent contraction, and compares with a median forecast of -5.5 percent in a Bloomberg survey of economists.

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Singapore's GDP declined 5.8 percent in the third quarter from a year earlier, according to final estimates released by MTI, better than the previous estimate of a 7 percent contraction

Healthier exports and industrial production have led economists, including at Maybank Kim Eng Research Pte Ltd, to upgrade their growth projections for Singapore. The bank had forecast the city-state would post a 5.1 percent contraction in the final third-quarter estimate, helped especially by pharmaceuticals manufacturing and improvement in real estate, retail trade, and transportation and storage, according to a report last week.

An easing in the virus count in Singapore has given room to policy makers looking to ease restrictions that have hindered business re-openings. The daily number of new cases, including incoming travelers ordered to quarantine, has hovered in single digits for most of the past few weeks.

Singapore officials have said there’s still scope to provide more fiscal stimulus after pledging about S$100 billion (US$74 billion) in aid so far this year. Prime Minister Lee Hsien Loong said he sees the government running a budget deficit at least through early next year, and perhaps “a while” longer, in order to support ailing consumers and businesses.

On a quarterly basis, the economy grew a non-annualized 9.2 percent from the previous three months. The data follow the second quarter’s 13.3 percent plunge from the same period in 2019, which marked a record in data going back to 1990.