Singapore’s Economic Rebound Slows Amid Renewed Virus Limits
Singapore’s economy lost momentum in the second quarter as weeks of tightened mobility restrictions weighed on this year’s expansion.
Gross domestic product in the three months through June contracted a seasonally adjusted 2% from the previous quarter, when it expanded 3.1%, the Ministry of Trade & Industry said Wednesday. The median estimate among 15 economists surveyed by Bloomberg was for a quarterly contraction of 1.8%, as the city-state reimposed restrictions to stem a fresh wave of Covid-19 infections.
Compared to a year earlier, when the economy nosedived amid lockdowns at the start of the pandemic, activity rebounded 14.3%. The expectation was for 14.8% growth, according to the median estimate of 16 economists.
In absolute terms, the economy in the second quarter remained 0.9% below its level from the same period in 2019, before the pandemic, according to the ministry.
“The economy will definitely be above pre-pandemic levels by the full year,” said Chua Hak Bin, senior economist at Maybank Kim Eng Research Pte. in Singapore. The city-state “is on a stronger footing compared with the rest of the neighborhood: The Covid situation is under control and vaccinations are much higher. Singapore can start strategizing on how it’s going to reopen its economy and borders.”
Policy makers expect Singapore’s economy to grow at least 4%-6% this year after it suffered its worst contraction last year since independence in 1965. The official forecast for full-year growth is due to be revised next month.
“For the full year, above 6% growth is eminently likely, so there should be an upgrade in the official growth forecast, maybe to the 6%-7% range,” said Selena Ling, head of Treasury research and strategy at Oversea-Chinese Banking Corp. in Singapore.
What Bloomberg Economics Says:
Singapore’s seasonally adjusted contraction in the second quarter was deeper than expected, but the year-on-year bounce was still solid enough to require a boost in our forecast. We now expect annual growth of at least 6.2% in 2021, compared with an earlier projection of 5.8%. With virus curbs still relatively strict, activity should gain significant momentum once herd immunity is achieved to allow a full reopening of the economy in 4Q.
-- Tamara Mast Henderson, Asean economist
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The city-state’s economy has been buoyed during the pandemic by robust exports and a resilient financial-services industry, while more tourism-reliant sectors such as hospitality and food and beverage continue to suffer.
Read more: Singapore Sees Virus-Versus-Vaccine as Test to Global Recovery
The Singapore dollar was little moved by the data, trading at 1.356 to the U.S. dollar as of 9:15 a.m.
The outlook will depend largely on whether Singapore is able to meet vaccination targets in the months ahead and keep the Covid caseload low, as well as the broader regional and global recoveries. The government aims to have two-thirds of the population fully vaccinated by National Day on Aug. 9.
“Even as Singapore’s GDP is on course to cruise past the 4%-6% growth target for the year, there should be no illusions about inflated headlines from the base,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. He warned of “downside risks that linger, and interruptions to the recovery that lurk as the delta variant outbreaks around Asean cast a shadow on Singapore’s small, open economy.”
Wednesday’s advance release marks the government’s first look at the economy’s performance in the second quarter, based mainly on data from April and May. More data in coming weeks will firm up the picture for final second-quarter figures in late August.
Other highlights from the GDP release:
- Manufacturing shrank 1.8% from the prior three months and grew 18.5% year-on-year
- Construction was down 11% q/q and up 98.8% y/y
- Services industries dropped 1% from the first quarter and expanded 9.8% from the same time last year
©2021 Bloomberg L.P.