Photo: Bloomberg
Amid the heightened uncertainties arising from the Covid-19 pandemic, the Ministry of Trade and Industry (MTI) has kept its 4-6% growth forecast for Singapore’s GDP in FY2021.
The forecast will be reviewed again in August when there is “more data” and “greater clarity” over the economic situations both within the country and around the world, says MTI in its report on May 25.
The forecast comes despite the better-than-expected showing in the 1Q2021, as Singapore’s GDP expanded by 1.3%, supported by the manufacturing, finance & insurance and wholesale trade sectors.
The figure marks a reversal from the 2.4% contraction in the 4Q2020, and a 3.1% growth q-o-q, extending the 3.8% expansion in the 4Q2020.
See: Stronger economic growth expected in 2021, but 1Q2021 GDP may still be in the red : Economists
During the 1Q2021, the manufacturing sector registered the most gains with a 10.7% expansion y-o-y in the 1Q2021, even faster than the 10.3% growth seen in the 4Q2020. This was due mainly to the output expansions in the electronics, precision engineering and chemicals clusters.
The finance & insurance sector grew by 4.7% y-o-y, extending the 4.9% expansion in the 4Q2020. Growth was mainly supported by the banking segment, which expanded on the back of a pickup in credit intermediation activities. The fund management, insurance and activities auxiliary to financial services segments also posted “healthy growth”.
The wholesale trade sector expanded by 3.5% y-o-y, ahead of the 1.8% growth seen in the 4Q2020, supported by expansion in the machinery, equipment & supplies segment.
The retail trade sector grew by 1.4% y-o-y, reversing from the 4.7% contraction in the 4Q2020. This was supported by higher motor vehicular and non-motor vehicular sales volumes, and partly attributable to the low base effect from the 1Q2020.
The accommodation sector saw a 19.0% y-o-y expansion in the 1Q2021 due to the low base effect from 1Q2020 as international visitor arrivals had started to plunge by then. That said, the expansion marks a reversal from the 19.7% contraction seen in the 4Q2020.
The information & communications sector expanded 6.4% y-o-y in the 1Q2021, from the 2.6% achieved in the 4Q2020. This was driven by strong performance from the IT & information services and “others” segments as well as games & software publishing activities.
The “other services industries” expanded by 0.5% y-o-y, turning around from the 5.7% contraction in the 4Q2020. The sector’s expansion was supported by growth in the education, health & social services and public administration & defence segments.
The construction sector contracted by 22.7% y-o-y, registering an improvement from the 27.4% contraction seen in the 4Q2020, due to the declines in construction works in the public and private sectors.
The transportation & storage sector shrank by 16.5% y-o-y, extending the 27.4% contraction in the 4Q2020, due to the broad-based contraction of air, water and land transport segments.
The air transport segment saw a sustained plunge in air passengers handled, while the water transport segment registered a decline in total sea cargo. Meanwhile, the land transport segment experienced lower ridership figures due to safe distancing measures and work-from-home (WFH) practices.
The food & beverages sector contracted by 9.4% y-o-y, improving from the 19.0% contraction in the 4Q2020. All segments within the sector saw a decline in sales volume, especially food caterers and restaurants.
The real estate sector shrank by 3.9% y-o-y, easing from the 10.8% contraction in the 4Q2020. The sector’s contraction was mainly due to a decline in rentals in commercial offices and retail spaces.
The professional services sector contracted by 4.5% y-o-y, improving from the 7.5% contraction in the 4Q2020. All segments in the sector shrank, mainly due to the declines in the other professional, scientific & technical services and architectural & engineering, technical testing & analysis segments.
The administrative & support services sector shrank by 12.9% y-o-y, extending from the 14.9% contraction in the 4Q2020. This was due to declines in the rental & leasing as well as other administrative & support services segments.
Looking ahead, MTI noted that the external economic environment has improved despite the disruption of activities caused by the pandemic.
The US, China, Japan and Southeast Asian economies such as Malaysia, Indonesia and Thailand are projected to rebound or expand in the FY2021.
The Singapore economy may even outperform the 4-6% growth forecast, but there are also “significant downside risks,” says MTI.
“The most important is the trajectory of the Covid-19 pandemic. Countries are experiencing recurring waves of infections, with the emergence of more transmissible strains of the virus, the easing of safe management restrictions, and delays in vaccinating populations. These resurgences, as well as the countries’ public health responses to them, will inevitably affect their economic growth,” it adds.
“Domestically, while Covid-19 is generally well under control, and we are making good progress vaccinating the entire population, there remain significant risks and uncertainties in our own Covid-19 situation. These non-economic risks can have a major impact on our GDP growth this year.”
