ECONOMISTS and firms remain cautious about the economic promise of the third and final phase of Singapore's reopening amid the Covid-19 pandemic, given global uncertainty and the necessarily uneven nature of any recovery.
"I don't think there is any false hope about Phase 3," said DBS senior economist Irvin Seah. The government has been warning of an "uneven recovery" for some months, he added. Singapore entered Phase 2 of its reopening on June 19.
Singapore Business Federation chief executive officer Ho Meng Kit said: "Broadly, businesses recognise that, unlike past crises, this pandemic is likely to be protracted.
"Given that the depth and breadth of the impact are unprecedented, there is expectation that demand will likely remain lacklustre for some time yet."
Last week, Education Minister Lawrence Wong, who co-chairs the multi-ministry taskforce on Covid-19, said the government is "working out the roadmap towards Phase 3", and will share the plans when ready.
The plan will see the relaxation of border-control measures and of curbs on the number of people who can gather when dining out, visiting other homes, or going to places of worship.
"Barring a fresh wave of infections in Singapore, a further easing of social restrictions should provide a further boost to the economy that extends into 2021," said UOB economist Barnabas Gan.
He expects larger gatherings and more bilateral travel agreements to benefit sectors such as food and beverage, wholesale and retail trade, and hospitality-related services.
But he remains concerned about recurring waves of infection elsewhere, which could hurt demand from key trading partners.
There might also be continued softness in construction, given the uncertainty over infections among migrant workers, he said.
If larger social gatherings are allowed, this could boost the recreational, entertainment, MICE (meetings, incentives, conventions and exhibitions) and some hospitality businesses, said Maybank Kim Eng analyst Chua Hak Bin, adding: "The impact on growth will however be more incremental and will not be as large as the move into Phase 2."
A smooth transition to Phase 3 could mean an upside to full-year growth forecasts for 2020, according to OCBC chief economist Selena Ling. "Market players will see the shift to Phase 3 as moving in the right direction and things should improve from here," she said. "Hopefully, there may be further upside in 2021."
She added: "A K-shaped recovery is possible," referring to a situation where sectors of the economy take different trajectories: some recovering, but some stagnating or doing even worse.
She sees the financial and manufacturing sectors recovering faster than construction, aviation and hospitality-related industries, as recovery in the latter depends on the development and availability of a vaccine.
Said Mr Seah: "What would make the big difference would be the borders."
Yet it is unlikely that international borders will be reopened fully, as that would be premature, he added.
With border controls being hard to relax, air travel and tourism-related services will likely continue to struggle in Phase 3, said Dr Chua.
In October, growth is usually boosted by tourists visiting during China's Golden Week, but not this year, said CIMB Private Banking economist Song Seng Wun, who expects a continued drag from hospitality and tourism.
And while domestic demand will be supported by "a sense of security" in tackling the pandemic, external demand is a different matter, he said.
If Singapore's Phase 3 "coincides with greater confidence and reopening elsewhere, then the export-oriented side would also get a lift". But this seems unlikely in Europe and the US, for instance.
Firms remain very cautious given the global downturn and decreased global connectivity during the pandemic, said Association of Small & Medium Enterprises president Kurt Wee.
Rather than expecting Phase 3 to usher in recovery, companies may be looking at how to rationalise inefficiencies, and preparing for potential recovery in the middle or late part of next year, he noted. "Business are hoping that the government will send a strong signal of support right up to the middle of next year."
In the latest quarterly SBF-Experian SME Index, most respondents expect a fall in demand in the next six months, said Mr Ho.
Firms "appear to be adopting a more cautious wait-and-see approach, with aspirations pertaining to growth put on hold and expansion plans remaining neutral".
Mr Wee expects more firms to wind up in the fourth quarter, as do economists. The struggling nightlife entertainment scene does not "have high hopes" for Phase 3 - but would appreciate some loosening of restrictions, said Mr Wee.
"I don't think businesses expect to go back to normal," he noted. Firms are aiming to "stay lean, stay effective", and those that have pivoted to business models with less human interaction will do better, he added.