Executive Search in Singapore – 2021 Outlook

Return to Growth Expected in 2021

The Ministry of Trade and Industry announced in August 2020 that Singapore’s GDP growth is expected to come in at “-6.5 to -6.0 per cent” in 2020 and “+4.0 to +6.0 per cent” in 2021.

For 2021, the major advanced and developing economies are expected to recover from the massive economic disruptions caused by COVID-19 and see a rebound in their GDP from the low base in 2020.  However, the path to recovery is expected to be slow and uneven, with many economies not likely to return to pre-COVID levels until end-2021.

Uncertainties and risks in the global economy remain.

First, notwithstanding positive news on vaccine development, as well as advancements in therapeutics and testing, the risk of periodic resurgence of infections around the world remains. The re-imposition of lockdowns could dampen business and consumer confidence and pose a drag on the global recovery.

Second, the protracted nature of the recovery in many countries could cause renewed pressures on corporate and financial sector balance sheets, which could in turn lead to financial system stresses and financial market dislocations such as capital outflows from emerging market economies. These could then trigger feedback loops and negatively affect the global economy. Excessive private sector indebtedness arising from loose monetary conditions also remains a concern.

Third, amidst elevated uncertainty surrounding the COVID-19 situation, there is a higher risk of a miscalibration of policy settings which, together with tightening funding conditions, could result in a premature withdrawal of policy support in the key economies, thereby impeding their recovery.

Fourth, there continues to be geopolitical uncertainty involving the major economies, which could in turn weigh on global trade and the global recovery.

Return to Growth

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.

First, trade-related services sectors are expected to benefit from the pickup in external demand. At the same time, the manufacturing sector is projected to continue to expand, with the electronics and precision engineering clusters boosted by robust semiconductor demand from the 5G market. Likewise, growth in the information & communications and finance & insurance sectors is expected to remain healthy, bolstered by sustained demand for IT and digital solutions, and credit and payment processing services respectively.

Second, aviation- and tourism-related sectors are projected to see a gradual recovery in passenger volumes and visitor arrivals. Similarly, consumer-facing sectors are expected to benefit from the recovery in visitor arrivals, as well as improvement in consumer sentiments amidst better labour market conditions. However, economic activity in these sectors is not likely to return to pre-COVID levels even by end-2021.

Third, the construction sector is projected to recover from the low base this year, although construction activity will continue to be dampened by the implementation of safe management measures.

The recovery of the Singapore economy in the year ahead is expected to be gradual and will depend to a large extent on how the global economy performs and whether Singapore is able to continue to keep the domestic COVID-19 situation under control.

Regarding the outlook, Irvin Seah, economist at DBS Bank, commented:

The economy is on the mend. […] Growth improvement in regional markets such as China will be crucial, and likely to be sustained if expansionary fiscal and monetary policies remain intact. The new Biden administration could potentially provide hope and more certainty to the US-China relationship, which will be beneficial to small and trade dependent countries such as Singapore. More importantly, like many countries, Singapore’s near-term economic outlook will also depend on how the COVID situation evolves heading into 2021.”

At the United Overseas Bank,  economist Barnabas Gan sees a strong rebound in 2021:

The latest GDP data in 3Q20 further confirms that Singapore’s economy has been improving since the trough in 2Q20, led primarily by the manufacturing sector. Should the pace of recovery be sustained into 2021, Singapore’s economy should revert to positive growth, and comfortably clock an average growth of 5.0% in 2021.”

Contact the author, Edwin Yeo at edwin-yeo@cornerstone-group.com
Information on Cornerstone’s Executive Search Office in Singapore