Singapore: Revised estimate reveals upgraded GDP growth for Q1
Singapore’s economy grew more than initially expected in Q1, according to new figures released on 25 May, as activity continued to recover from the inhibiting effects of the coronavirus pandemic. GDP grew 1.3% year-on-year in the first quarter, above the 2.4% contraction seen in Q4 2020 and a notable improvement on the 0.2% expansion from April’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 3.1% in Q1 following the previous period’s 3.8% rise.
The first quarter’s improvement in annual terms was broad-based, with the manufacturing, construction and services sectors all contributing to the uptick in activity. The manufacturing sector grew at a faster pace of 10.7% year-on-year in the quarter (Q4 2020: +10.3% yoy), driven by strong electronics output. Meanwhile, the contraction in the construction sector softened further to 22.7% in Q1 from 27.4% in Q4 2020, while the services sector also shrank at a slower rate (Q1: -0.5%; Q4 2020: -4.7%).
Looking ahead, the recovery is set to carry on in Q2 as the manufacturing industry continues to grow on robust external demand for electronics. However, the recent tightening of pandemic-related restrictions in response to a number of new outbreaks in mid-May has the potential to weigh on activity towards the tail end of the quarter. Nevertheless, the Ministry of Trade and Industry maintained its 2021 GDP growth forecast of between 4.0% and 6.0%, but cited the larger-than-usual degree of uncertainty surrounding the economic panorama.
Regarding the outlook, Edward Lee and Jonathan Koh, economists at Standard Chartered, in their report titled Singapore – Growth recovery to remain uneven published on 27 May, commented:
“We maintain our 2021 GDP growth forecast of 6.3%. While we see upside risk to our forecast, the latest infection resurgence domestically and around the region poses a risk. Going into Q2, low base effects would result in very strong y/y numbers. Sequential estimates will provide a clearer reflection of momentum. Overall growth data may remain upbeat, but tourism- and consumer facing-related sectors may remain suppressed due to mobility restrictions. Sectors heavily reliant on foreign workers, such as the construction sector, may also be affected by labour shortage.”
Meanwhile, Euben Paracuelles and Charnon Boonnuch, economists at Nomura, are slightly more positive in their outlook, stating:
“We maintain our 2021 GDP growth forecast of 7.5%, implying a strong recovery. Our forecast pencils in slower sequential growth in Q2 of 0.4% from 3.1% in Q1, taking into account the impact of stricter social distancing measures in phase 2 which will last until 13 June. However, we expect the balance of risks to our forecast tilted more to the downside, as we acknowledge that there is a risk that these measures could be extended beyond the current deadline due to the still large number of community cases, of which many were unlinked.”