An earlier estimate said 0.2 per cent. The final number was 1.3. On Tuesday, 25 May 2021, Singapore’s Ministry of Trade and Industry (MTI) confirmed that the economy grew 1.3 per cent year on year in the first quarter, a clear reversal from the 2.4 per cent contraction of the previous quarter. A Reuters poll of economists had pencilled in only 0.9 per cent.
Measured against the preceding quarter and adjusted for seasons, output rose 3.1 per cent. That extended a 3.8 per cent expansion at the end of 2020.
Despite the beat, the ministry left its full-year forecast where it was, at 4 per cent to 6 per cent growth, and said it would look at the range again in August. The Straits Times noted that the first-quarter result would normally have justified an upgrade, but a fresh Covid-19 surge at home and abroad held that back.
Factories carry the quarter
Manufacturing did most of the work. The sector grew 10.7 per cent year on year, up from 10.3 per cent in the fourth quarter, with electronics, precision engineering and chemicals expanding while transport engineering, general manufacturing and biomedical manufacturing slipped.
Wholesale trade rose 3.5 per cent, against 1.8 per cent the quarter before. Retail trade grew 1.4 per cent. Information and communications picked up speed, going from 2.6 per cent to 6.4 per cent.
The picture was far worse where people have to move about. Construction shrank 22.7 per cent, transportation and storage fell 16.5 per cent, and food and beverage services dropped 9.4 per cent, all compared with the same period a year earlier.
Why the ministry held back
Gabriel Lim, MTI’s permanent secretary, told a media briefing that the outside world looked better than it had in February, mainly because growth outlooks for advanced economies such as the United States had been raised. He added a warning: “At the same time, however, the pandemic continues to disrupt activities in many economies, threatening to undermine any recovery.”
Closer to home, Singapore had tightened its safety measures earlier in May after a surprise rise in community cases. The phase two (heightened alert) rules were due to last until mid-June. Lim called them a setback for parts of the economy, though he expected a recovery this year in step with the global rebound and further progress on vaccination. He also saw some reason for hope: after 15 months of experience, countries might manage to avoid repeated blanket lockdowns even if outbreaks flare again.
MTI itself said the 4 per cent to 6 per cent range could still be beaten, but flagged recurring waves of infection, more transmissible strains, eased restrictions and slow vaccination elsewhere as the main downside risks. Many of the countries affected are among Singapore’s major economic partners.
What economists said
Selena Ling, OCBC Bank’s chief economist, called the 4 per cent floor quite conservative from the start, given that 2020 had brought a record 5.4 per cent contraction. She said the rest of the year hinges on whether Covid-19 and the tighter measures drag into the third quarter, and on whether manufacturing keeps driving growth.
Irvin Seah of DBS Bank kept his full-year forecast of 6.3 per cent, reasoning that the strong first quarter would soften any slide in April to June. Sin Beng Ong at JPMorgan Chase Bank went the other way, cutting his 2021 call to 7 per cent from 7.8 per cent because of the tighter restrictions.
Sources
- Singapore economy grows 1.3% in Q1 but no change to GDP forecast for 2021 – The Straits Times
- MTI Maintains 2021 GDP Growth Forecast at "4.0 to 6.0 Per Cent" Amidst Significant Uncertainties Arising from the COVID-19 Pandemic – Ministry of Trade and Industry
