Singapore: Revised estimate reveals GDP contracted less than initially expected in Q4
February 15, 2021
Singapore’s economy contracted less than initially expected in Q4, according to new figures released on 15 February, as activity continued to recover from the sharp downturn in Q2. GDP fell 2.4% year-on-year in the fourth quarter, above the 5.8% contraction seen in the third quarter and a notable improvement on the 3.8% contraction from January’s advanced estimate. Meanwhile, on a seasonally-adjusted quarter-on-quarter basis, the economy continued to expand, albeit at a more moderate pace, with GDP increasing 3.8% in Q4 following the previous period's 9.0% jump. Overall, GDP fell 5.4% in 2020, contrasting the 1.3% growth clocked in 2019 and marking the worst result since Singapore became an independent country in 1965.
The fourth quarter’s improvement in annual terms was broad-based, with the manufacturing, construction and services sectors all contributing to the softer overall fall. The manufacturing sector continued to grow strongly, expanding 10.3% year-on-year (Q3: +11.0% yoy), driven by robust electronics and pharmaceutical output. Meanwhile, the contraction in the construction sector softened markedly to 27.4% in Q4 from 52.5% in Q3, while the services sector also shrank at a slower rate (Q4: -4.7%; Q3: -8.3%).
Looking ahead, the recovery is set to carry on in Q1 2021 as the manufacturing industry continues to grow on robust external demand for electronics. Moreover, widespread vaccination plans and the prospect of increased global travel and tourism towards the second half of 2021 bodes well for the beleaguered services sector going forward. As such, the Ministry of Trade and Industry maintained its 2021 GDP growth forecast of between 4.0% and 6.0% in 2021.
Regarding the outlook, Irvin Seah, economist at DBS Bank, commented:
“We expect a gradual improvement in services growth in 2021 although the pace of recovery will be uneven across various services segments. While tourism related sectors will continue to struggle, other segments of the economy should do well in the recovery phase. Externally oriented services clusters such as financial and trade related services will benefit from the increased global business and trade transactions. Domestic services industries such as retail and [food and beverages] have benefited from the gradual easing of restrictive measures and should enjoy further impetus from more pronounced recovery in the labour market in 2H21.”
Meanwhile, Euben Paracuelles and Charnon Boonnuch, economists at Nomura, are more positive in their outlook, stating:
“We maintain our full-year 2021 GDP growth forecast of 7.5%, well above consensus forecast of 6.0% and the MTI’s forecast range. Our forecast implies economic output will return to pre-Covid levels by Q2 2021, the fastest in ASEAN. We remain optimistic of a still-robust manufacturing sector, which we think will receive a double boost from strong external demand for electronics, which is buoyed [by] the global tech up-cycle, as well as from pharmaceuticals output, which is benefitting from surging global vaccine demand.”
Author: Stephen Vogado, Economist