Singapore: Revised estimate reveals upgraded GDP growth for Q2
Singapore’s economy grew more than initially expected in Q2, according to new figures released on 11 August, as activity continued to recover from the inhibiting effects of the coronavirus pandemic. GDP grew 14.7% year-on-year in the second quarter, contrasting the 1.5% contraction seen in Q1 and marking an improvement on the 14.3% expansion from July’s advanced estimate. Meanwhile, on a seasonally-adjusted quarter-on-quarter basis, the economy slipped back into contraction, with GDP falling 1.8% in Q2 and contrasting the previous period’s 3.3% rise.
The second quarter’s improvement in annual terms was broad-based, and in no small part aided by a healthy base effect: GDP shrank 13.3% in Q2 2020 due to the inhibiting effects of the pandemic. Looking at the details of the release, the manufacturing sector grew at a faster pace of 17.7% year-on-year in the quarter (Q1: +11.4% yoy). Meanwhile, the construction sector surged back into growth, expanding 106.2% in Q2 and contrasting the 23.2% contraction in Q1, while the services sector also rebounded in the quarter (Q2: +10.3% yoy; Q1: -0.3% yoy).
Looking ahead, the recovery is set to continue in the second half of the year, 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-July has the potential to weigh on activity throughout their duration. Nevertheless, the Ministry of Trade and Industry (MTI) upgraded its 2021 GDP growth forecast to between 6.0% and 7.0% (previous estimate: 4.0%–6.0%), citing the economy’s stronger-than-expected performance in the first half of the year.
Regarding the outlook, Barnabas Gan, economist at United Overseas Bank, commented:
“All-in-all, we keep our growth outlook for Singapore at 6.5% for the whole of 2021, which is at the middle of the revised MTI’s growth outlook range of between 6.0% and 7.0%. Singapore’s economic prognosis remains resilient given the strong vaccination takeup rate, coupled with its strong export and manufacturing performance seen year-to-date. Still, we remain concerned on how Covid-19-related risks may evolve in the months ahead for Singapore, as well as across Singapore’s key trading partners, as anecdotal evidence has shown how quickly issues may turn south should Covid-19 risks magnify.”