Given the prognoses by the economists based on better-than-expected data, the Singaporean economy is back in expansion mode for the first quarter of 2021. Economists said “green shoots” of recovery are emerging for Singapore following a year in the doldrums due to the COVID-19 pandemic.
Gross domestic product (GDP) is up 0.2 per cent year-on-year in the January to March period, according to flash estimates from the Ministry of Trade and Industry (MTI) on Wednesday (Apr 14).
The gains, although marginal, indicated the economy’s first quarterly growth since the pandemic out broke and beat expectations for a 0.2 per cent contraction in a Reuters poll.
Economists also pointed out that more optimism from the Singapore central bank, which released its half-yearly policy review on the same day.
While the Monetary Authority of Singapore (MAS) left its monetary policy stance untouched, it said Singapore’s economy is “likely to exceed the upper end” of an official forecast for growth to be between 4 and 6 per cent this year.
The report also noted firmer global growth prospects and how that has supported business and consumer confidence, driving a quicker growth in production and spending.
According to Maybank Kim Eng economists, this is “a far more upbeat assessment” compared to the central bank’s last policy review in October last year.
He also pointed to a “nuanced, yet notable” omission in the central bank’s policy statement.
“What this means is that as the recovery unfolds, the MAS is, at the margin, taking a more state-dependent view on maintaining accommodation rather than a time-assured stance, which is probably more appropriate when economic stress and uncertainty are greater,” said a note from Mizuho Bank.
Manufacturing drives the growth
In the first quarter, the manufacturing sector drew the growth, accounting for 7.5 per cent year-on-year. Accounting for about one-fifth of Singapore’s economy, the sector has been a growth-driver in the pandemic-fuelled downturn, and economists said its outlook remains buoyant.
This is principally due to growth in clusters such as precision engineering, biomedical manufacturing and electronics. According to DBS senior economist Irvin Seah, the sub-sectors immensely benefited from the boom in electronics demand as businesses look to digital solutions in a post-COVID world.
Services such as the pandemic-hit sectors like transportation and storage, continued to decline in the first quarter. However, this was at a smaller magnitude of 1.2 per cent year on year. This part of the economy fell by 4.7 per cent in the preceding quarter.
Construction also suffered a smaller contraction – declined 20.2 per cent, compared with an earlier 27.4 per cent down in the fourth quarter of last year.
Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye are predicting in full-year growth of 6.2 per cent, up from 4.5 per cent, due to factors such as improvements in the global economic outlook and a rapid roll-out of vaccines.
Barclays Bank economist Brian Tan revised his forecast from 6 per cent to 7.5 per cent growth.
“With the COVID-19 outbreak still under control, the economy remains on the mend. That said, our 7.5 per cent growth forecast partly reflects favourable base effects following last year’s contraction of 5.4 per cent, and is still unlikely to close the negative output gap,”.
Despite convid-induced contraction, the Singpore’s economy is poised to grow leap and bounds and the prospects are brighter than expected.
