SINGAPORE – The Singapore economy grew by 0.2 per cent on a year-on-year basis in the first quarter of 2021, a turnaround from the 2.4 per cent contraction recorded in the previous quarter, according to advance estimates released by the Ministry of Trade and Industry on Wednesday (April 14).
This was the economy’s first quarterly growth since the fourth quarter of 2019, before the onset of the Covid-19 pandemic.
The first-quarter growth was a surprise as analysts had tipped the economy to shrink 0.5 per cent year on year, according to a Bloomberg poll.
The Monetary Authority of Singapore (MAS) said in its bi-annual review, also on Wednesday morning, that “Singapore’s GDP growth this year is likely to exceed the upper end of the official 4-6 per cent forecast range, barring a setback to the global economy.”
MAS maintained its zero per cent per annum rate of appreciation of its Singdollar policy band, saying it expects an above-trend pace of economic growth this year even as the sectors worst hit by the crisis will continue to face significant demand shortfalls.
On a quarter-on-quarter seasonally-adjusted basis, the economy expanded by 2.0 per cent, extending the 3.8 per cent growth in the preceding quarter, according to the estimates that are largely based on data from the first two months of the year.
For the first quarter, the manufacturing sector was the best performer, posting year-on-year growth of 7.5 per cent, better than the 7.3 per cent expansion it saw in the whole of 2020. However, the sector lost some steam from the previous quarter when it grew by 10.3 per cent year-on-year.
Construction, that is still suffering from some Covid-related work restrictions, shrank 20.2 per cent. Still, the figure was slightly better than the 27.4 per cent contraction it suffered in the fourth quarter and the 35.9 per cent decline in the whole of 2020.
The construction sector also weighed down the quarter-on-quarter growth, with expansion coming at just 8.4 per cent versus the 55.6 per cent jump in the previous quarter.
Manufacturing also did well on a quarterly basis. The sector grew 7.6 per cent, reversing the contraction of 1.4 per cent in the fourth quarter.
MTI said manufacturing growth was aided by output expansions in electronics, precision engineering, chemicals and biomedical manufacturing. Meanwhile, output declines were recorded in the transport engineering and general manufacturing clusters.
The relatively smaller contraction in construction came on the back of a pickup in public and private sector construction activities in the first quarter as compared to the previous quarter, MTI said.
The services industry – still suffering from Covid-19 mobility curbs – continued to shrink, posting a contraction of 1.2 per cent year-on-year. But its performance was a tad better than in the fourth quarter when it sank by 4.7 per cent. Services declined by 6.9 per cent in full-year 2020.
On a quarter-on-quarter seasonally-adjusted basis, services expanded 0.4 per cent in the first quarter, slower than the 4.1 per cent growth recorded in the previous quarter. The sector had shrunk 6.9 per cent in the whole of 2020.
Mr Jeff Ng, economist at HL Bank, said the services sector’s performance was better than expected.
“While services growth looks flatter compared to the previous quarter, perhaps weighed down by the lack of any upside impetus, we still see further upsides from improvements in economic activity levels, as Singapore gradually removes Covid-19 related restrictions,” he said,
Within the services sectors, the wholesale & retail trade and transportation & storage sectors shrank by 4.1 per cent year-on-year in the first quarter, moderating from the 6.4 per cent contraction in the previous quarter.
The contraction recorded for this group of services industry was due to continued weakness in the transportation & storage sector, which was in turn primarily caused by the impact of the ongoing Covid-19 pandemic on the air transport, water transport and land transport segments, MTI said.
The accommodation & food services, real estate, administrative & support services and other services industries shrank by 3.9 per cent year-on-year, an improvement from the 9.9 per cent contraction in the previous quarter.
Meanwhile, the information & communications, finance & insurance and professional services sectors collectively grew by 3.7 per cent year-on-year in the first quarter, faster than the 1.4 per cent expansion in the preceding quarter.
Growth was supported by healthy expansions in the information & communications and finance & insurance sectors, even as the professional services sector contracted, MTI said.
MTI has maintained its November forecast of the economy growing by 4.0 to 6.0 per cent this year. The higher end of the 2021 estimate would make it the best year since 2011, when gross domestic product grew by 6.3 per cent.
After an unprecedented 5.4 per cent economic contraction, which was Singapore’s worst-ever recession since independence, the 2021 estimate looks stellar. The economy grew by 1.3 per cent in 2019.
However, the growth acceleration this year can be partially attributed to the low base set in the second quarter of last year when the economy shrank by 13.3 per cent – the worst in a quarter ever.