Opening Remarks by PS Mr Gabriel Lim for Economic Survey of Singapore 2021

1 Good morning. 

2 Details of Singapore’s economic performance for the fourth quarter and 2021 as a whole, as well as the outlook for 2022, are contained in the press release. I shall highlight a few key points.

3 In the fourth quarter of 2021, the Singapore economy grew by 6.1 per cent on a year-on-year basis. For 2021 as a whole, the economy expanded by 7.6 per cent, which is a rebound from the 4.1 per cent contraction in 2020. GDP growth in 2021 was mainly driven by the manufacturing, finance & insurance and wholesale trade sectors.

4 Let me now turn to the outlook for 2022.

5 Since the last media briefing in November last year, Singapore’s external demand outlook has deteriorated slightly as the Omicron wave led to a tightening of restriction measures in many economies around the world. Meanwhile, global supply bottlenecks remain and are expected to persist throughout the first half of 2022. This will constrain industrial production and GDP growth in the near term. Persistent supply bottlenecks, alongside rising energy prices due to geopolitical tensions, have also exacerbated global inflationary pressures.

6 Unfortunately, downside risks in the global economy have also increased. 

• First, the trajectory of the COVID-19 pandemic remains uncertain. While vaccination rates and booster rollouts have picked up in many economies, the potential emergence of more virulent strains of the virus continues to pose a risk to the global economic recovery.

• Second, there is a risk that ongoing global supply disruptions could be more protracted than expected.

• Third, there are upside risks to energy prices amidst supply concerns arising from escalating geopolitical tensions involving Russia and Ukraine, and in the Middle East, as well as unpredictable weather conditions. A spike in energy prices would exacerbate inflationary pressures and weigh on global economic growth.

• Fourth, should monetary policy tightening in the advanced economies be faster than expected, market adjustments could be disorderly and risks to financial stability could intensify. 

7 Domestically, the MTF yesterday signalled a further progressive easing of restrictions as our health situation stabilises. This will support the recovery of our consumer-facing sectors and alleviate labour shortages in sectors that are reliant on migrant workers. Air travel and visitor arrivals are also expected to improve with the gradual loosening of travel restrictions and expansion of Vaccinated Travel Lanes.

8 Against this external and domestic backdrop, the Singapore economy is expected to continue to expand this year, although the outlook for the various sectors remains uneven.

• First, the growth prospects for outward-oriented sectors such as manufacturing and wholesale trade remain strong given the continued global economic recovery. In particular, the expansion of the manufacturing sector will continue to be supported by sustained global demand for semiconductors and semiconductor equipment. Growth in the information & communications and finance & insurance sectors is also expected to remain healthy.

• Second, recovery of the tourism- and aviation-related sectors is expected to be slow as recurring COVID-19 outbreaks and potential virus mutations could delay the lifting of travel restrictions globally, and travel demand is also likely to take time to recover. Overall, activity in these sectors is expected to remain below pre-COVID levels even by the end of 2022.

• Third, consumer-facing sectors such as retail and food & beverage services are projected to see a gradual recovery as domestic restrictions are progressively eased, and consumer sentiments improve. However, the real value-added of the food & beverage services sector and some tourist-reliant segments of the retail trade sector are not expected to return to pre-COVID levels by end-2022, due in part to the slow recovery in tourist arrivals.

• Fourth, activities in the construction and marine & offshore engineering sectors are projected to continue to recover on the back of the progressive easing of border restrictions on the entry of migrant workers. Nonetheless, as it will take time to fully address the shortfall in labour required to meet business needs, labour shortages are likely to persist and weigh on the recovery of the sectors. In particular, the output of the construction sector is expected to remain below pre-pandemic levels throughout 2022.

9 Taking into account the global and domestic economic environment, and barring the materialisation of downside risks in the global economy, Singapore’s GDP growth for 2022 is projected to come in at “3.0 to 5.0 per cent”, unchanged from the forecast announced at the last media briefing in November. 

10 Together with my panel members, I am now happy to take your questions.