Singapore's third-quarter GDP shrinks at slower pace of 7% after economy gradually reopens following circuit breaker
SINGAPORE: The Singapore economy shrank at a slower pace of 7 per cent in the third quarter from the same period last year, following the phased reopening of the economy after the COVID-19 "circuit breaker" period.
This compares with an estimated 7.6 per cent contraction by private-sector economists surveyed by the Monetary Authority of Singapore (MAS) last month.
This is also an improvement from the 13.3 per cent contraction in the second quarter, advance estimates from the Ministry of Trade and Industry (MTI) showed on Wednesday (Oct 14).
On a quarter-on-quarter seasonally adjusted basis, the Singapore economy expanded by 7.9 per cent in the third quarter, rebounding from the 13.2 per cent contraction in the preceding quarter.
MANUFACTURING EXPANDS, CONSTRUCTION SLUMP EASES
The manufacturing sector grew by 2 per cent on a year-on-year basis in the third quarter, reversing from the 0.8 per cent contraction in the previous quarter.
MTI said growth was supported by output expansions in the electronics and precision engineering clusters, which were in turn driven by “robust global demand” for semiconductors and semiconductor manufacturing equipment.
On a quarter-on-quarter seasonally-adjusted basis, the manufacturing sector expanded by 3.9 per cent, a turnaround from the 9.1 per cent contraction in the second quarter.
The construction sector shrank at a slower pace of 44.7 per cent on a year-on-year basis in the third quarter, after a 59.9 per cent decline in the previous quarter.
Meanwhile, construction output in the third quarter remained weak on account of the slow resumption of construction activities due to the need for construction firms to implement COVID-19 safe management measures.
On a quarter-on-quarter seasonally-adjusted basis, the construction sector grew by 38.7 per cent, rebounding from the sharp contraction of 59.4 per cent in the second quarter when most construction activities had to come to a stop due to the COVID-19 circuit breaker period and movement restrictions in the foreign worker dormitories.
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COVID-19 RESTRICTIONS CONTINUE TO AFFECT SERVICES INDUSTRIES
Within services, aviation- and tourism-related sectors such as air transport and accommodation continued to see significant contractions, as global travel restrictions and sluggish travel demand brought air travel and visitor arrivals to a near complete standstill.
The services producing industries contracted by 8 per cent on a year-on-year basis in the third quarter, extending the 13.6 per cent decline in the previous quarter.
On a quarter-on-quarter seasonally-adjusted basis, the services producing industries expanded by 6.8 per cent, a reversal from the 11.2 per cent decline seen in the second quarter.
Other trade-related services sectors, such as wholesale trade, were also weighed down by weak external demand, said MTI.
Although consumer-facing sectors such as retail and food services saw an improvement in performance as the economy exited the circuit breaker, they remained in contraction, with sales volumes coming in below year-ago levels due to weak consumer confidence and capacity constraints resulting from safe distancing measures.
The finance and insurance as well as information and communications sectors recorded steady growth during the quarter.
PHASED ECONOMIC REOPENING
MTI said the improved performance of the Singapore economy in the third quarter came on the back of the phased re-opening of the economy following the "circuit breaker" that was implemented between Apr 7 and Jun 1.
The ministry used non-annualised quarter-on-quarter seasonally-adjusted growth rates rather than annualised quarter-on-quarter seasonally-adjusted growth rates to report its third-quarter estimates, and said it will continue to do so going forward.
It switched to non-annualised rates because annualised "is prone to misinterpretation if it is cited without context", said MTI in an explanatory note on its website.
"In particular, the public may end up misconstruing the performance of the economy when there are large changes in real GDP from the previous quarter which are unlikely to continue over the next three quarters," it said, adding that the -43.3 per cent annualised quarter-on-quarter seasonally-adjusted growth rate in the second quarter had "exaggerated" the contraction in the economy.
Singapore entered a technical recession in the second quarter of this year after logging two consecutive quarter-on-quarter contractions.
Official forecasts estimate that the economy may shrink between 5 per cent and 7 per cent for the whole of 2020.
Singapore’s overall unemployment rate rose to 3.4 per cent in August, climbing past the high of 3.3 per cent recorded in September 2009 during the global financial crisis.
Singapore's central bank on Wednesday stood pat on its monetary policy, saying "an accommodative stance will remain appropriate for some time".
The MAS also said that while third-quarter GDP has picked up after a sharp contraction in the previous quarter, GDP growth momentum is "likely to be modest" against a sluggish external backdrop, persistent weakness in some domestic services and limited recovery in the travel-related sector.
"Nevertheless, barring a renewed worsening of the course of the COVID-19 pandemic, the Singapore economy is expected to expand in 2021, following the recession this year," it said.
The advance GDP estimates are computed largely from data in the first two months of the quarter, in this case July and August. This is the first full quarter after Singapore exited the COVID-19 circuit breaker period.
After Phase 1 of reopening which lasted 18 days, the country has been in Phase 2 since Jun 19, with retail shops allowed to reopen and restaurants resuming dine-ins while observing safe distancing.
The COVID-19 multi-ministry task force is working on a roadmap towards Phase 3 of reopening of economic activities and will give more details in the coming weeks, Health Minister Gan Kim Yong said in Parliament on Oct 5.
He also said that Singapore will remain in Disease Outbreak Response System Condition (DORSCON) Orange “for the time being”.
“Even as we move towards Phase 3, the new normal will be different from what we were used to in the pre-COVID days,” said Mr Gan then.
“At this moment, particularly we have to be very mindful that while the number of cases in Singapore is low, the cases around us, other parts of the world, is still rising. So therefore, we cannot let our guard down.”
The Government has set aside close to S$100 billion to fight the COVID-19 pandemic, presenting four Budgets from February to May and an additional round of tapered support in August.
All of these measures have “substantially cushioned” the economic damage, said Deputy Prime Minister Heng Swee Keat in Parliament last week.
New measures and extensions to several support initiatives were announced by Mr Heng on Oct 5, and these will be discussed when Parliament sits on Wednesday.
MTI said it will release the preliminary GDP estimates for the third quarter, including performance by sectors, sources of growth, inflation, employment and productivity, in its Economic Survey of Singapore in November.