Singapore's economy contracted less than initially estimated in the third quarter due to the gradual easing of Covid-19 lockdown measures and authorities expect the city-state to bounce back to growth next year from its worst recession.
Gross domestic product (GDP) fell 5.8% year-on-year in the third quarter, the ministry of trade and industry said on Monday, smaller than the 7% drop seen in the government's advance estimate.
Analysts expected a 5.4% contraction, according to the median of 10 forecasts.
The government said it now expects full-year GDP to contract between 6.5% and 6% versus its prior forecast for a 5% to 7% decline. The country is still facing the biggest downturn in its history.
The economy is expected to grow 4% to 6% next year.
"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," the MTI said in a statement.
However, economic activity in consumer-facing sectors was not likely to return to pre-Covid levels even by end-2021, the MTI said.
The economy grew 9.2% from the previous three months on a seasonally adjusted basis, compared with the 13.2% contraction in the second quarter. The bounce marked the end of a "technical recession", as it followed two preceding quarterly contractions.
The country has spent about S$100 billion, or 20% of its GDP, on virus-related relief to support households and businesses as it battles its worst slowdown.
Singapore has reported more than 58,000 cases of Covid-19 mainly due to mass outbreaks in migrant worker dormitories. But locally transmitted infections have dropped to zero in recent days, with most of the new cases being imported.
Edward Robinson, Deputy Managing Director, Monetary Authority of Singapore, told a media briefing current policy settings remained appropriate.
The central bank left monetary policy unchanged at its last meeting in October and said its accommodative stance will remain appropriate for some time.
"This low for longer or looser for longer story will very much extend at least into the first half of next year," said Selena Ling, head of treasury research and strategy at OCBC Bank.
She said the government might feel under pressure to have a significantly expansionary budget next year if the recovery was not robust in the first half.