Singapore’s GDP was up by 6.5% y-o-y in the 3Q2021, according to advance estimates by the Ministry of Trade and Industry (MTI) on Oct 14.
The advance estimates are derived largely from data in July and August.
The figure is lower than the 15.2% y-o-y growth logged in 2Q2021, which was due partly to the low base in the 2Q2020. During the period, Singapore’s GDP fell by 13.3% y-o-y due to the circuit breaker measures and a sharp fall in external demand due to the Covid-19 pandemic.
According to the Ministry of Trade and Industry (MTI) Singapore on Oct 14, the Singapore economy expanded by 0.8% q-o-q, reversing from the 1.4% q-o-q contraction in the 2Q2021.
The expansion was led by the construction sector, which expanded by 57.9% y-o-y in the 3Q2021, extending from the 117.5% y-o-y growth in the 2Q2021.
The growth was largely due to the low base effects given the slow resumption of construction activities following the circuit breaker period from April to June in 2020.
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In absolute terms, the value-added of the sector remained 25.1% below pre-Covid-19 levels. Activity at construction worksites was weighed down by labour shortages due to border restrictions and the entry of migrant workers.
On a seasonally adjusted q-o-q basis, the sector shrank 0.4% q-o-q.
The information & communications, finance & insurance and professional services sectors collectively expanded by 7.7% y-o-y, extending from the 10.1% y-o-y growth seen in the 2Q2021.
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All sectors saw expansions y-o-y during the 3Q2021.
The professional services sector, in particular, expanded on the low base in 3Q2020, caused by the slow resumption in construction activities.
On a seasonally adjusted q-o-q basis, the sectors collectively saw growth of 1.2% q-o-q.
The manufacturing sector expanded by 7.5% y-o-y in the 3Q2021. Growth during the quarter was supported by output expansions in all clusters except the chemicals cluster.
The electronics and precision engineering clusters in particular, registered strong growth amid the sustained global demand for semiconductors and semiconductor equipment.
On a seasonally-adjusted q-o-q basis, the value-added of the manufacturing sector remained unchanged.
Meanwhile, the wholesale & retail trade and transportation & service sectors grew by 5.0% y-o-y, as all sectors expanded during the 3Q2021.
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The wholesale trade sector, especially, saw growth on the back of a pickup in external demand.
Growth in the transportation & storage sector was partly due to the low base effects. In 2020, strict border restrictions had weighed heavily on the air transport segments in same quarter that year.
The value-added of the group, on the whole, remained 7.3% below pre-pandemic levels.
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On a seasonally adjusted q-o-q basis, the sectors collectively contracted by 1.3% q-o-q.
Finally, accommodation & food services, real estate, administrative & support services and other services sectors grew 3.1% y-o-y, moderating from the 14.5% y-o-y expansion in 2Q2021.
Within the group, the real estate and other services sectors expanded.
Meanwhile, the accommodation & food services, as well as administrative & support services contracted due to the ongoing travel restrictions and tighter restrictions domestically.
The value-added of the sectors, on the whole, remained 11.3% below pre-Covid-19 levels.
On a seasonally adjusted q-o-q basis, the sectors expanded by 0.8% q-o-q.
MTI says it will release the preliminary GDP estimates for the 3Q2021 in November.
DBS Group Research has upped its full-year GDP growth to 6.7% from 6.3% previously.
The raised forecast is due to a high level of vaccination rate, which will make for a safe reopening of the economy and subsequently allow economic activities to resume to normalcy, says DBS's senior economist Irvin Seah.
"Barring the risks on the efficacy of existing vaccines being weakened as a result of virus mutations or waning antibody levels, the reopening of the economy is expected to provide renewed impetus to growth over the next 12 months," he writes in an Oct 14 report.
On MAS's normalised monetary policy, Seah says monetary policies would hvae to follow suit amid the normalisation of economic fundamentals.
"This pre-emptive move by the central bank will help to rebalance the dynamics between growth and inflation as Singapore continues to embark on this recovery journey. We do not expect further adjustment in the policy stance unless there is further upside risk to both growth and inflation," he says.
Singapore’s GDP growth estimate for the 3Q2021 stood close to OCBC Bank’s forecast of 6.4% y-o-y.
“The growth moderation was expected, given the return to the Phase 2 (Heightened Alert) and tightened Covid restrictions in July. GDP growth was largely driven by manufacturing (7.5% y-o-y), while both services and construction sectors saw their second consecutive quarter of expansion at 5.5% y-o-y and 57.9% y-o-y (due to low base in 2020),” says Selena Ling, head of treasury research and strategy at OCBC Bank.
“The electronics and precision engineering industries remained key beneficiaries of the improved global demand story, while the construction sector remained mired by the foreign manpower crunch due to border restrictions and the absolute value-add still remains 25% below its pre-Covid levels. For the services sector, growth momentum in the financial services and infocomms also remained resilient,” Ling adds.
On this, Ling has made no change in her official 2021 GDP growth forecast of 6% to 7% y-o-y.
“The 2Q2021 GDP growth was also revised marginally higher to 15.2% y-o-y (-1.4% q-o-q), versus 14.7% y-o-y (-1.8% q-o-q) previously. This brought first half growth to 7.7% y-o-y, but will likely slow to around 5.8% y-o-y in the second half of 2021 as low base effects fade. Still, the Singapore economy is tipped to remain in above trend growth in the quarters ahead, barring a global resurgence of the virus or a setback in the re-opening pace, and output should return to potential next year,” says Ling.
Singapore’s GDP expansion of 6.5% in the 3Q2021 disappointed market estimates at 6.6% y-o-y, says UOB economist Barnabas Gan.
“While we expect the construction sector to rise 15.5% in 2021, we remain cautious due to the Covid-19 pandemic especially in the migrant community, where an exacerbation of Covid-19 infection could affect labour-intensive industries such as construction,” Gan adds.
“The services sector will depend on the recovery of Singapore’s domestic economy and the gradual reopening of its borders. Retail sales are forecasted to slow in the remaining months of 2021, considering the dissipation of low base effects then.”
Photo: Bloomberg
