Singapore’s Macro Economic Policy and Development Change in COVID-19 and Post-COVID-19 Economy

Mr Desmond Choo asked the Minister for Trade and Industry how will Singapore's macroeconomic policy and development change in a COVID-19 and post-COVID-19 economy.

COVID-19 has resulted in massive economic disruptions and changed the world irrevocably. Based on advance estimates1, the Singapore economy contracted by 5.8 percent in 2020, the worst full-year contraction since Singapore's independence.

While Singapore's GDP is projected to rebound and grow by 4.0 to 6.0 percent this year, the recovery of the Singapore economy is expected to be gradual, with GDP not likely to return to pre-COVID levels until the latter half of 2021. The recovery will also be uneven across sectors. Even as sectors like manufacturing and finance and insurance are likely to continue to post steady growth this year, aviation- and tourism-related sectors are expected to take a longer time to recover given global travel restrictions and weak travel demand.

Amidst these economic challenges, there is an opportunity for us to build the foundation for Singapore's continued success. We will pursue four main strategies to support our economic recovery and position Singapore for sustained growth in the longer term.

First, we will fortify Singapore's position as a critical node in global value chains. As a small city-state with limited resources, we will not be able to participate in every global value chain nor every part of a global value chain. Our strategy is therefore to identify high-value segments of key global value chains that can create good jobs for Singaporeans, especially in areas such as agritech, biomedical sciences, electronics and infocomm and media, and attract and groom the best global and local companies in these areas. This will allow us to enhance the relevance and resilience of our economy, and ensure that Singapore cannot be easily bypassed.

Second, we will forge new trade rules in areas such as data, finance and technology. COVID-19 has changed consumer preferences, resulting in a greater demand for e-commerce, e-services and digital channels. To improve digital connectivity, we will engage with likeminded partners to set high standards in digital trade rules in order to develop our digital economy and provide our firms with access to new markets and opportunities. For example, we successfully concluded digital economy agreements with Australia, Chile and New Zealand in 2020. These agreements help our companies trade more seamlessly with other countries.

Third, we will pursue an innovation-led and sustainable economy, given the increasing value that accrues to innovation activities in global value chains, as well as the increased demand for sustainability solutions. To promote innovation, we will continue to bolster our R&D and technology translation efforts to support the creation of new products and services, while encouraging companies to expand to regional and global markets. To promote sustainability, we will invest in the green sector and establish ourselves as a hub for sustainability, providing Environmental, Social and Governance (ESG) solutions to meet our region's and the world’s needs for sustainable development.

Fourth, we will push ahead with transformation efforts to help our companies and workers stay resilient and competitive. Companies realise that the world has changed as a result of COVID-19. The sooner our businesses transform, the better positioned they and their workers will be to seize new opportunities. For companies in growth sectors, we will continue to help them expand and create jobs. For companies facing a prolonged poor economic outlook, we will help them pivot to new areas of opportunities, by developing their corporate capabilities and boosting their access to additional platforms for innovation and new markets beyond Singapore. For our workers, we will continue to invest in their skills development and training. This includes providing them with the exposure and experience required to compete in a globalised economy, so that they are more likely to succeed.

While the Singapore economy has started on its path towards recovery with our vaccination programme well underway, there are still significant risks ahead. Notwithstanding the availability of vaccines, there remains uncertainty over how the COVID-19 pandemic will evolve around the world given the emergence of new strains of the virus and difficulties faced in vaccination rollouts globally. However, the pandemic can also be a catalyst for Singapore to reinvent itself and sharpen its competitive edge. The Government will continue to support our workers and businesses through this difficult period so that, together, we can emerge stronger from this crisis.