Singapore economy grows 3.4% in Q1, slower than previous quarter

SINGAPORE: Singapore’s economy grew 3.4 per cent year-on-year in the first quarter of 2022, according to advance estimates released by the Ministry of Trade and Industry (MTI) on Thursday (Apr 14).

This marked a slower pace than the previous quarter when the economy expanded 6.1 per cent. Economists polled by Reuters had expected growth of 3.8 per cent.

On a quarter-on-quarter seasonally adjusted basis, Singapore’s gross domestic product (GDP) grew 0.4 per cent in the first quarter, slower than the 2.3 per cent in the preceding quarter.

The advance GDP estimates are computed largely from data gathered in the first two months of the quarter. 

"They are intended as an early indication of GDP growth in the quarter and are subject to revision when more comprehensive data become available," said MTI.

The advance estimates indicated that Singapore's growth still "remained firmly in positive territory" despite headwinds from the Omicron variant, said Mr Alex Holmes, an emerging Asia economist at research firm Capital Economics.

COVID-19 caseloads surged at the start of the year due to the Omicron variant. With numbers falling last month, Singapore eased many of its safe management measures.

These include allowing more people to dine out together and permitting fully vaccinated travellers to enter without having to quarantine.

The slowdown in the first quarter was largely due to the manufacturing sector coming off a high base, said MUFG Bank's senior currency analyst Jeff Ng.

"We’ve had a lot of strong demand for manufacturing during the pandemic. Already at such high levels and with Singapore also facing capacity constraints, it is unlikely for manufacturing to keep growing at the same pace that we observed for the past two years," he told CNA.

Moving forward, the easing of COVID-19 restrictions, for both domestic activity and international travel, will support economic growth in the coming quarters, added Mr Holmes.

"Overall, we expect growth of 4 per cent in 2022. That would mean that, having hit its pre-pandemic trend in the fourth quarter of last year, GDP is set to rise above its pre-crisis trend in the coming quarters," he wrote in a note.

That said, some concerns remain amid possibilities of growth slowing down in major economies such as United States and China.

Aggressive interest rate hikes to tackle inflation are likely to dampen growth in the US, said Mr Ng, while lockdowns in parts of China due to fresh COVID-19 outbreaks are fuelling further concerns about growth in the world's second-largest economy.

"If US or China's growth slow significantly, Singapore will likely be the most vulnerable in Southeast Asia," he added.

SECTORAL PERFORMANCE

The manufacturing sector grew by 6 per cent year-on-year in the first quarter, lower than the 15.5 per cent growth in the preceding quarter. Growth during the first quarter was supported by output expansions in all clusters, except for the chemical cluster.

Electronics and precision engineering clusters continue to record strong growth, driven by sustained global demand for semiconductors and semiconductor equipment respectively.

The constructor sector grew at a slower pace of 1.8 per cent in the first quarter, compared to the 2.9 per cent in the previous quarter. 

"In absolute terms, the value-added of the sector remained 25.3 per cent below its pre-pandemic (first quarter of 2019) level, as activity at construction worksites continued to be weighed down by labour shortages," said MTI.

Among the service sectors, the group comprising wholesale and retail trade, as well as transportation and storage sectors grew 3.2 per cent in the first quarter.

All sectors within the group expanded during the quarter. The wholesale trade sector grew in tandem with the performance of Singapore’s merchandise exports. While the transportation and storage sector also expanded, this was partly due to the low base a year ago when many travel restrictions were still enforced.

The information and communications, finance and insurance as well as professional services sectors collectively expanded by 5.3 per cent in the first quarter, down from the 6.6 per cent growth in the previous quarter.

The expansion in the information and communications sector was supported by strong demand for IT and digital solutions, said MTI.

The remaining group of services sectors expanded, except the accommodation and food services sector. This was primarily due to a fall in government demand for hotel rooms to serve as quarantine facilities as Singapore transitioned towards living with COVID-19.

Singapore's economy grew 7.6 per cent last year, the fastest pace in more than a decade, recovering from a 4.1 per cent contraction in pandemic-hit 2020.

Authorities have projected growth of 3 per cent to 5 per cent this year. The preliminary GDP estimates for the first quarter of 2022 will be released by MTI in May.