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Singapore economy expands 1.3% in Q1; MTI maintains 4-6% full-year growth forecast despite Covid-19 uncertainties

SINGAPORE — After four quarters of year-on-year decline, Singapore’s economy finally clocked positive growth — expanding 1.3 per cent in the first quarter of this year compared with the same period a year ago.

The central business district in Singapore on Feb 5, 2021.

The central business district in Singapore on Feb 5, 2021.

  • Singapore’s economy grew 1.3 per cent in the first quarter of 2021, compared to the same period a year ago
  • MTI has maintained its growth forecast of between 4 and 6 per cent for the whole year
  • Despite stricter safe distancing measures now, MTI’s permanent secretary Gabriel Lim said the situation is “qualitatively different” from last year’s circuit breaker 
  • There is high level of uncertainty given how volatile the Covid-19 situation can be 

 

SINGAPORE — After four quarters of year-on-year decline, Singapore’s economy finally clocked positive growth — expanding 1.3 per cent in the first quarter of this year compared with the same period a year ago. 

This was significantly higher than the 0.2 per cent growth the authorities estimated based on data from the first two months of the quarter. 

Singapore’s economy grew 3.1 per cent compared to the previous quarter on a seasonally-adjusted basis. 

The Ministry of Trade and Industry (MTI) also said in a press release on Tuesday (May 25) that it will maintain its growth forecast for Singapore for the full year at between 4 per cent and 6 per cent, despite stricter safe distancing measures that were imposed on May 16 and which will last for nearly one month, and heightened uncertainties arising from the pandemic. 

During a media briefing on the same day, MTI’s permanent secretary Gabriel Lim said: “Domestically, while the recent tightening of domestic restrictions and border controls represent a setback to segments of the Singapore 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”. 

However, the pace of recovery will be more uneven across various sectors of the economy than earlier expected. 

While external-oriented sectors such as manufacturing, finance and insurance as well as information and communications will remain strong, the tourism and aviation-related sectors will see a further delay in their recovery, noted MTI. 

Consumer-facing sectors such as retail trade and food and beverage will be affected by the tightening of safe distancing measures, and the recovery of the construction and marine and offshore engineering sectors will be significantly impeded with the recent border restrictions that ban foreign workers from South Asia entering into Singapore, it added. 

The authorities had previously said that Singapore’s growth could likely go beyond the official forecast of 6 per cent if there is no slowdown in the recovery of the global economy or if there are no increases in the number of locally-transmitted Covid-19 cases. 

But with the recent spike in community infections, Singapore announced tighter Covid-19 restrictions from May 16 to June 13. During this period, the maximum number of people allowed to gather has been cut down to two and no dining-in is allowed. 

When asked about the impact of the tighter safe distancing measures on Singapore’s economy, Mr Lim said there will definitely be an impact on consumer-facing companies, like those in the food and beverage and retail sectors. 

“From a GDP (gross domestic product) impact perspective, it will have an impact but it’s not something that we believe necessitates, at this point in time anyway, a downgrade in our overall forecast,” he said. 

He said there are a few sectors in the economy that remain open and some, like manufacturing, are running at full-steam.

He added that safe distancing measures under the current Phase 2 (heightened alert) are “qualitatively different” from the circuit breaker in April and May last year, which halted almost all economic and social activities. 

The improving global economy was another factor in MTI’s consideration to maintain its growth forecast. Major economies such as the United States and China are expected to grow this year, it said. 

Other markets such as Japan, the Eurozone and India are also projected to recover. 

However, MTI also noted that there are heightened uncertainties and significant downside risks, given how volatile the Covid-19 situation can be. 

“We are being quite respectful of how this virus can evolve and also affect the world and obviously the economies along with it. The world is trying to stay alive against this virus, the virus is trying to stay alive against the world,” said Mr Lim. 

“We can be sure there will be another variant. We can be sure. Does it then require a subsequent lockdown, or does it then mutate into something closer to the flu, that has a significant bearing on how the global economy progresses,” he added. 

HOW THE DIFFERENT SECTORS PERFORMED

  • Manufacturing: Expanded 10.7 per cent year-on-year

  • Construction: Contracted 22.7 per cent year-on-year

  • Wholesale trade: Expanded 3.5 per cent year-on-year

  • Retail trade: Expanded 1.4 per cent year-on-year

  • Transportation and storage: Contracted 16.5 per cent year-on-year

  • Accommodation: Expanded 19 per cent year-on-year

  • Food and beverage: Contracted 9.4 per cent year-on-year

  • Information and communications: Expanded 6.4 per cent year-on-year

  • Finance and insurance: Expanded 4.7 per cent year-on-year

  • Real estate: Contracted 3.9 per cent year-on-year

  • Administrative and support services: Contracted 12.9 per cent year-on-year

  • Other services: Expanded 0.5 per cent year-on-year

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GDP economy MTI

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