Singapore's economy contracted by 5.8 percent in the third quarter compared with a year ago, but is expected to rebound to robust growth in the next year, policymakers said. The island nation's economy will shrink as much as 6.5 percent this year, data released by the Ministry of Trade and Industry (MTI) showed.

The ministry said Singapore's growth outlook is tied in with the performance of the major economies. Growth 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," the MTI said.

Major Sectors Stressed

In a remarkable note, the MTI said Singapore's economic activity in major sectors like aviation, tourism, retail trade and food services will not return to pre-COVID-19 levels even by the end of 2021.

Singapore city
Singapore city Reuters

The one major sector that will see faster rebound is manufacturing, which is supported by growth in electronics and precision engineering clusters. The information and communications sector as well as finance and insurance sectors will remain healthy throughout 2021.

However, the contraction in the third quarter was not as severe as the one experienced in the previous quarter, with data showing that the sequential decline in GDP numbers halved from the previous quarter. The economy had declined more than 13 percent in the previous three months in the aftermath of the coronavirus pandemic.

Better than Estimates

In some cheer for the economy, the third quarter figures were better than the estimates of the government. The advance projection had shown that the economy was in for a decline of up to 7 percent quarter-on-quarter.

Singapore manufacturing output
A general view of factories at an industrial park in Singapore September 16, 2014. Reuters

A gradual reopening of the economy that started in June helped the rebound, and the rate of growth was rather in sync with the rebound seen around major world economies, the MTI said. It also said headwinds for the economic growth remained strong on account of fears of a virus resurgence in various parts of the world.

"While some economies like China are expected to see a sustained recovery for the rest of 2020 as their domestic COVID-19 outbreaks remain under control, others like the US and Eurozone are experiencing a resurgence in infections, which may dampen their recovery as restrictions are reimposed to slow the spread of the virus," the MTI said, according to the Channel News Asia.