Singapore’s economy grew 1.3 per cent in the first quarter of 2021 from a year earlier, well above the 0.2 per cent rise first estimated, the Ministry of Trade and Industry (MTI) said on Tuesday, May 25. Economists in a Reuters poll had expected 0.9 per cent. The previous quarter had shown a 2.4 per cent contraction.
The stronger result did not change the official outlook. MTI kept its 2021 growth forecast at 4 per cent to 6 per cent, saying the good quarter and solid export demand help balance the risk from the recent tightening of domestic restrictions and border controls. It will look at the forecast again in August, when more data are in.
Analysts said the quarter would normally have justified an upgrade. A Covid-19 upsurge at home and abroad held that back. Earlier in May, Singapore had moved to phase two (heightened alert) rules to contain a surprise rise in community cases, and those stay in force until mid-June.
Where the growth came from
Adjusted for seasons, output rose 3.1 per cent from the fourth quarter, which had itself grown 3.8 per cent. Manufacturing expanded 10.7 per cent year on year, up from 10.3 per cent the quarter before. Electronics, precision engineering and chemicals led the way, outweighing falls in transport engineering, general manufacturing and biomedical manufacturing.
Wholesale trade grew 3.5 per cent, against 1.8 per cent in the fourth quarter, and retail trade rose 1.4 per cent. Information and communications accelerated to 6.4 per cent from 2.6 per cent. The weak spots were construction, which shrank 22.7 per cent, transportation and storage, down 16.5 per cent, and food and beverage services, down 9.4 per cent.
What officials and economists said
MTI permanent secretary Gabriel Lim told a media briefing that the outside economic picture has improved since February, mostly because growth outlooks for advanced economies such as the United States have been raised. “At the same time, however, the pandemic continues to disrupt activities in many economies, threatening to undermine any recovery,” he said.
He described the latest curbs as a setback for parts of the economy, but expected a recovery this year as the world rebounds and domestic vaccination moves ahead. The last 15 months, he added, suggest countries can avoid repeated blanket lockdowns even if outbreaks return.
MTI said it was still possible for Singapore to beat its forecast range, though the biggest downside risk is the path of the pandemic. Several of Singapore’s major trading partners are dealing with repeated waves of infection.
Irvin Seah, a senior economist at DBS Bank, stuck with his 6.3 per cent full-year forecast, since the strong first quarter should partly offset a likely dip in April to June. OCBC’s chief economist Selena Ling called the 4 per cent floor in the MTI range conservative from the start, given last year’s record 5.4 per cent contraction.
Others cut their numbers. JPMorgan analyst Sin Beng Ong lowered his 2021 growth estimate to 7 per cent from 7.8 per cent. “The revisions are due to the tightening of stringency measures following a rise in Covid-19 cases,” he said.
