Following the historic y-o-y plunge of 13.3% in 2Q2020, Singapore’s economy moderated to shrink by 7% y-o-y in the third-quarter, according to official advance estimates. On a q-o-q seasonally-adjusted basis, the republic’s GDP expanded by 7.9% in 3Q2020 ended September, a significant deviation from the 13.2% plunge seen in the previous quarter, according to the Ministry of Trade and Industry (MTI) on Oct 14.
This rebound comes on the heels of the phased re-opening of Singapore’s economy from June 19, after the two-month-long lockdown in April and May that prohibited the operations of non-essential services to curb the spread of Covid-19. The 3Q2020 GDP performance is in line with the 7.6% y-o-y drop anticipated by some 23 private-sector economists in a survey released by the Monetary Authority of Singapore (MAS) on Sept 7.
Among the different industries, the construction sector suffered the most, with a 44.7% y-o-y plunge, as worksites were either undermanned or forced to remain at a standstill as workers remained under quarantine at their dormitories. However, the sector should rebound in the current 4Q2020 as movement restrictions on foreign worker dormitories were lifted in August, says economist Sung Eun Jung at Oxford Economics.
Similarly, the consumer-facing services sector— which captures the performance of items such as wholesale trade, retail and food services — fell by 8% y-o-y. Due to travel restrictions, tourism-driven industries such as hospitality and retail continue to suffer, as did the wholesale trade segment.
Nevertheless, 3Q2020 was an improvement from the 13.6% y-o-y decline seen in the preceding 2Q2020, as consumption activities improved with the start of the Phase Two measures which allow dining in at restaurants and in-person shopping at retail outlets.
Unfortunately, numbers for the segments have yet to return to pre-Covid-19 levels due to the weak labour market which has put a dent on consumer confidence as well as capacity constraints resulting from safe distancing measures, notes Selena Ling, head of treasury research and strategy at OCBC Bank.
Interestingly, 3Q2020’s performance was lifted by the manufacturing sector — which was also the only sector to expand, with a 2% growth from the same period last year. This was supported by output expansions in the electronics and precision engineering clusters, which are driven by robust global demand for semiconductors and semiconductor manufacturing equipment.
“Manufacturing and trade have been remarkably resilient in this pandemic recession,” observe Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye. The duo expect the final 3Q2020 growth numbers due in November to be upgraded “as global demand for electronics appears to be firming up”.
Based on the 3Q2020 numbers, economists The Edge Singapore spoke to were mostly of the view that this marks the start of the republic’s recovery which had bottomed out in the previous quarter ended June. “The worst is over for the economy and the third quarter marks the start of recovery from the Covid-19 pandemic,” notes Irvin Seah, senior economist at DBS Bank.
Still, Seah and the other economists are looking at an uneven pace of recovery that takes the form of a K-shape. “The recovery will come to different industries at a different pace and it will also feel very differently to different segments of the society,” they say. For instance, sectors such as IT, advanced manufacturing and financial services have been taking the lead in bolstering growth in 2Q2020 and 3Q2020. Meanwhile, recovery is still not in sight for sectors such as the construction, hospitality and the aviation sectors, which have taken a greater hit from the pandemic.
