Singapore economy grows 14.3% in Q2; strong growth largely due to low base a year ago: MTI
SINGAPORE: The Singapore economy grew 14.3 per cent year-on-year in the second quarter of this year, largely due to a low base in the same period last year when a COVID-19 "circuit breaker" was implemented, the Ministry of Trade and Industry (MTI) said on Wednesday (Jul 14).
The advance estimates for the second quarter, which are computed largely from data gathered in the first two months of the quarter, was much faster than the growth of 1.3 per cent in the preceding quarter.
In absolute terms, MTI said Singapore’s gross domestic product (GDP) in the second quarter of this year remained 0.9 per cent below the pre-pandemic level seen in the same quarter of 2019.
A strong GDP figure was largely expected for the April to June quarter, given the low base from last year when the economy contracted 13.3 per cent due to the circuit breaker quelling nearly all economic activities from Apr 7 to Jun 1.
Private-sector economists polled by the central bank in a recent quarterly survey had pencilled in year-on-year growth of 15 per cent for the second quarter.
On a quarter-on-quarter seasonally adjusted basis, the economy contracted by 2 per cent in the second quarter, a reversal from the 3.1 per cent growth in the preceding quarter.
Across sectors, construction saw the strongest growth with a 98.8 per cent year-on-year expansion, a turnaround from the 23.1 per cent decline in the preceding quarter.
The battered sector got a lift from the low base effects, as the circuit breaker had resulted in most construction activities stopping in the second quarter of last year.
MTI said that in absolute terms, the value-added of the construction sector remained 31.6 per cent below its pre-pandemic level in the second quarter of 2019.
Manufacturing expanded by 18.5 per cent year-on-year from April to June, extending the 11.3 per cent growth in the previous three months.
Support for growth came from output expansions in all clusters, except for biomedical manufacturing. The electronics and precision engineering clusters continued to see healthy expansions due to robust global demand for semiconductor and semiconductor equipment respectively.
The services producing industries as a whole grew 9.8 per cent year-on-year in the second quarter.
Breaking down into the various services sectors, wholesale and retail trade, and transportation and storage grew by 9.3 per cent, reversing the 1.7 per cent contraction in the previous quarter.
All sectors within this group expanded during the quarter, MTI said. In particular, growth of the retail and transportation and storage sectors was supported by a low base as strict domestic and border restrictions during last year's circuit breaker had led to a sharp decline in activity in these sectors in the second quarter of last year.
On the whole, the value-added of this group of sectors remained 6.8 per cent below its pre-pandemic level.
The information and communications, finance and insurance and professional services sectors collectively expanded by 7.8 per cent in the second quarter, extending the 3.2 per cent growth in the preceding three months.
All sectors in this group recorded healthy expansions, MTI said. The growth of the professional services sector was partly due to last year’s low base, even as weak economic activity in the region and sluggish domestic construction activity continued to weigh on the sector during the quarter.
The remaining group of services sectors – accommodation and food services, real estate, administrative and support services and other services sectors – expanded by 13.4 per cent year-on-year in the second quarter, reversing a 3.8 per cent contraction in the previous quarter.
Most sectors within the group also grew on the back of the low base in the second quarter of last year due to the circuit breaker, MTI said. On the whole, the value-added of this group of sectors remained 11.8 per cent below its level in the second quarter of 2019.
In particular, the recovery of the food services and other services sectors in the second quarter of 2021 was weighed down by the tightening of COVID-19 safety measures when Singapore was in Phase 2 (Heightened Alert) between May 16 and Jun 13. Under Phase 2 (Heightened Alert) measures, dining-in at food and beverage outlets was not allowed, among other restrictions.
STILL SET FOR RECOVERY
The Singapore economy is projected to gradually recover this year after shrinking 5.4 per cent last year in the country’s worst recession since independence.
The official growth forecast range for 2021 remains at 4 per cent to 6 per cent for now, with a review planned for next month.
While the quarter-on-quarter GDP figures point to a "broad-based" stumble in the second quarter due to the tightened COVID-19 measures, Mr Alex Holmes from Capital Economics expects the recovery to “regain momentum over the coming months” as measures are eased.
“The upshot is that, despite a setback (in the second) quarter, the economy should still see a strong recovery from the pandemic,” he wrote in a note. The economist still has a full-year GDP target of 6 per cent.
Mr Holmes added that the accelerated roll-out of vaccinations, with more than 4 million of Singapore’s population now having received at least one jab, should “lead to a rapid return to normality”.
"Further ahead, vaccines should enable Singapore to gradually reopen its border, which would provide a boost to the tourism sector," he said.
The external sector should also continue to perform well on the back of buoyant demand for semiconductor and pharmaceuticals, he added.