1 Good morning everyone and welcome to this virtual media conference.
2 The details of Singapore’s economic performance and outlook for 2021 are contained in the press release. Let me highlight a few key points.
3 In the second quarter of 2021, the Singapore economy expanded by 14.7 per cent on a year-on-year basis, faster than the 1.5 per cent growth in the previous quarter. The strong growth was largely due to the low base in the same period last year due to the Circuit Breaker, as well as the sharp fall in external demand amidst the COVID-19 pandemic.
4 Taking into account the GDP performance in the first quarter, the Singapore economy expanded by a better-than-expected 7.7 per cent on a year-on-year basis in the first half of this year.
5 Let me now turn to the economic outlook for the rest of 2021.
6 At the last media briefing in May, MTI maintained the GDP growth forecast for 2021 at “4.0 to 6.0 per cent” in view of the larger-than-expected degree of uncertainty over the course of the pandemic globally and domestically. MTI also indicated that the forecast would be reviewed in August when there was another quarter of data, as well as when we get greater clarity over the global and domestic economic situations.
7 Since then, COVID-19 cases continue to rise globally due to the Delta variant. However, vaccination rates have also picked up, especially in key advanced economies such as the US and Eurozone, which have in turn weakened the link between infections and deaths, and therefore allowed them to press on with their re-opening plans. By contrast, regional economies which have not been able to vaccinate their populations as quickly have had to re-impose restriction measures to curb a resurgence in infections. This has in turn dampened their growth outlook. On balance, the recovery in external demand for Singapore for the rest of 2021 remains largely on track.
8 Nonetheless, downside risks remain. A key risk continues to be the trajectory of the COVID-19 pandemic. The ongoing economic recovery in advanced economies could be derailed if vaccination progress stalls due to vaccine hesitancy or if the efficacy of existing vaccines is weakened as a result of virus mutations or waning antibody levels. Meanwhile, effective containment of the outbreaks in regional economies may be impeded by their slow vaccination rollouts, which could then lead to an even sharper and more protracted period of slowdown in these economies.
9 Domestically, within Singapore, the COVID-19 situation has stabilised, with our vaccination programme continuing to make good progress. Barring a major setback in the global economy, the Singapore economy is expected to continue to see a gradual recovery in the second half of this year, supported in large part by outward-oriented sectors. The progressive easing of domestic and border restrictions as our vaccination rates continue to rise will also help to support the recovery of our consumer-facing sectors and alleviate labour shortages in sectors that are reliant on migrant workers.
10 Against this backdrop, the recovery of the various sectors over the course of the year is expected to remain uneven.
· First, the growth prospects for outward-oriented sectors such as manufacturing and wholesale trade remain strong given the rebound in global demand. In particular, the manufacturing sector is projected to see robust growth due to strong semiconductor and semiconductor equipment demand.
· Second, tourism- and aviation-related sectors are projected to recover more slowly than previously thought. Even though domestic border restrictions may be eased towards the later part of this year, demand is not expected to return quickly as travel restrictions globally are likely to be lifted cautiously and global travel demand may also remain sluggish given the spread of more contagious strains of the virus.
· Third, while consumer-facing sectors such as retail and food & beverage services have been adversely affected by ongoing domestic restrictions, they should start to recover as the restrictions are eased over the course of the year, and as consumer sentiments improve in tandem with better labour market conditions.
· Fourth, the construction and marine & offshore engineering sectors are projected to see some recovery from the low base last year. However, labour shortages arising from prevailing border restrictions on the entry of migrant workers are likely to weigh on the recovery of activities at worksites and shipyards.
11 Overall, taking into account the better-than-expected performance of the Singapore economy in the first half of this year, as well as the latest external and domestic economic developments, the 2021 GDP growth forecast has been upgraded to “6.0 to 7.0 per cent”, from “4.0 to 6.0 per cent”.
12 Together with my panel members, I am now happy to take your questions.