Economy recovered to pre-COVID levels in Q1: Morgan Stanley

The multinational investment bank expects Singapore to reach GDP growth of above 8% in 2021.

Singapore’s economy likely recovered to pre-COVID-19 levels in the first quarter, according to Morgan Stanley’s mid-year outlook.

The multinational investment bank forecasts a full year GDP growth of 8% for 2021, and 4% in 2022, benefiting from a V-shaped global recovery.

Business optimism is high, the bank added, particularly in the manufacturing sector. In April, Singapore’s Purchasing Managers’ Index hit a two year high at 50.9 points.

While COVID-19 cases have increased over the past weeks, Morgan Stanley said the progress of the vaccine roll-out will limit the risks from a potential second lockdown.

“As a whole, the spread of infections remains relatively well contained, and Singapore's safe haven reputation coupledwith policy incentives has continued to attract family office and hedge fundAUM, spurring more capital inflows,” Morgan Stanley said.

It flagged corporate restructurings, escalating global trade tensions, government policy changes and another lockdown as key risks to this outlook.

On corporate restructuring, it noted that it could have either a positive or negative implication on the involed companies, citing the 15% decline in Singapore Press Holdings’ stock price after it announced that it will turn its media business non-profit.

“Overall, we expect to see more positive than negative impacts resulting from restructuring exercises, which we believe will continue to gather pace,” it added.

It noted that Soilbuild REIT, SembCorp Industries and Jardine Matheson all had their share prices increase one day after they announced their restructuring. These companies have all finished said process.

The investment bank is monitoring the ongoing or potential structuring of CapitaLand, Keppel Corp, Singapore Press Holdings, and SingTel.

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