SINGAPORE – Singapore maintained its economic growth forecast range for this year at 4 per cent to 6 per cent, despite increased uncertainty over the economic conditions, the Ministry of Trade and Industry (MTI) said on Tuesday (May 25).
This comes even as the economy performed stronger than expected in the first quarter of this year.
The final estimate for first-quarter growth came at 1.3 per cent on a yearly basis, compared with an earlier estimate of 0.2 per cent and the 2.4 per cent contraction in the previous quarter.
The January-March growth was even higher than the 0.9 per cent growth projected by economists in a Reuters poll.
The full-year forecast will be reviewed again in August, when there is more data and greater clarity over the global and domestic economic situations, MTI said in a statement.
MTI said uncertainties have increased and are characterised by both upside and downside risks, especially arising from the coronavirus pandemic at home and abroad.
Earlier this month, Singapore tightened its safety measures to contain a surprise surge in local community Covid-19 cases. The phase two (heightened alert) restrictions that will remain in effect until mid-June have raised concerns over the full-year growth target.
“Since February, the external economic environment has improved, even though the pandemic continues to disrupt activities in many economies and threatens to undermine any recovery,” it said.
“While the recent tightening of domestic restrictions and border controls represents a setback to segments of the economy, the broader economy should still see a recovery this year in tandem with the global economic rebound and further progress in the domestic vaccination programme.”
On a quarter-on-quarter seasonally adjusted basis, the economy grew by 3.1 per cent, extending the 3.8 per cent expansion in the fourth quarter of last year.
The first quarter growth came on the back of the manufacturing sector’s 10.7 per cent year-on-year expansion, faster than the 10.3 per cent growth recorded in the previous quarter.
MTI said the Jan-March growth was due to output expansions in the electronics, precision engineering and chemicals clusters, which outweighed output declines in transport engineering, general manufacturing and biomedical manufacturing.
The wholesale trade sector expanded by 3.5 per cent year on year, faster than the 1.8 per cent growth registered in the previous quarter, and the retail trade sector grew by 1.4 per cent.
Growth of the information and communications sector accelerated to 6.4 per cent year on year, from the 2.6 per cent achieved in the previous quarter.
However, the construction sector contracted by 22.7 per cent and the transportation and storage sector shrank by 16.5 per cent, compared with the same period last year. The food and beverage service sector contracted by 9.4 per cent year on year.
MTI said that while it is still possible that the Singapore economy will outperform the 4 per cent to 6 per cent growth forecast for this year, there are also significant downside risks, with the most important being the trajectory of the 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.”
The ministry said these resurgences, as well as the countries’ public health responses to them, will inevitably affect their economic growth.