Singapore’s GDP was up 7.1% y-o-y for the 3Q2021, according to data announced by the Ministry of Trade and Industry (MTI) on Nov 24. The figure is lower than the 15.2% expansion recorded in the previous quarter, but beats MTI's advanced estimates that forecasted 3Q2021 GDP growth at 6.5%.

This brings GDP growth for the first three quarters of 2021 to 7.7%. On a q-o-q seasonally-adjusted basis, the economy grew 1.3% in the 3Q, reversing from the 1.4% contraction in the 2Q.

In its press release, MTI announced it has narrowed its GDP growth forecast for 2021 from between 6% to 7% to “around 7%”.  For 2022, MTI is forecasting GDP growth to come in at 3% to 5%.

By sectors, the manufacturing sector grew by 7.2% y-o-y in 3Q2021, moderating from the 17.9% growth in 2Q. All clusters within the sector, except for the biomedical manufacturing cluster, expanded during the quarter. In particular, the electronics and precision engineering clusters continued to post healthy growth amidst robust global demand for semiconductors and semiconductor equipment respectively. 

On a q-o-q seasonally-adjusted basis, the manufacturing sector shrank marginally by 0.1%, easing from the 2.2% contraction in the second quarter. 

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The construction sector expanded by 66.3% y-o-y, slowing from the 117.5% expansion in the previous quarter, as both public sector and private sector construction output rose. On a q-o-q seasonally-adjusted basis, the sector posted growth of 4.9%, a reversal from the 2.4% contraction in the 2Q.

The wholesale trade sector grew by 5.9% y-o-y, faster than the 3.4% expansion in 2Q. Growth was bolstered by the strong wholesale sales of electronic components and telecommunications equipment & computers. On a q-o-q seasonally-adjusted basis, the sector registered flat growth, improving from the 0.6% contraction in the preceding quarter. 

The retail trade sector expanded by 0.7% y-o-y, slower than the 51.1% growth in 2Q, underpinned by a decline in motor vehicle sales volume due to a reduction in Certificate of Entitlement (COE) quotas. On a q-o-q seasonally-adjusted basis, the sector grew by 3.1%, a reversal from the 4.3% contraction in the preceding quarter. 


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Growth in the transportation & storage sector slowed to 8.2% y-o-y, from 20.1% in the second quarter. On a q-o-q seasonally-adjusted basis, the sector expanded by 1.3%, a turnaround from the 2.3% contraction in the previous quarter. 

The accommodation sector contracted by 4.1% y-o-y, a reversal from the 15.8% expansion in the preceding quarter. The performance of the sector was weighed down by continued weak visitor arrivals due to travel restrictions, even though demand from the government for hotel rooms to serve as quarantine facilities provided some support to the sector. On a q-o-q seasonally-adjusted basis, the sector grew by 3.6%, moderating from the 4.5% growth in the previous quarter. 

The food & beverage services sector shrank by 4.2% y-o-y, in contrast to the 36.9% expansion in the 2Q, following the re-imposition of tighter dine-in and event restrictions during the 3Q. On a q-o-q seasonally-adjusted basis, the sector contracted by 2.8%, extending the 8% contraction in the preceding quarter. 

The information & communications sector expanded by 10.4% y-o-y, the same pace of growth as in the previous quarter. The sector grew 6.2% on a q-o-q seasonally-adjusted basis, faster than the 1% growth in 2Q.

Growth in the finance & insurance sector came in at 9% y-o-y, extending the 9.8% recorded in 2Q, supported mainly by an expansion in the insurance segment. On a q-o-q seasonally-adjusted basis, the sector expanded marginally by 0.2%, moderating from the 2.7% growth in 2Q.

The real estate sector grew by 16.8% y-o-y, slower than the 26.3% growth in the preceding quarter. The performance of the commercial property segment continued to be sluggish. On a q-o-q seasonally-adjusted basis, the sector recorded growth of 3.9%, a turnaround from the contraction of 3.3% in the second quarter. 

The professional services sector expanded by 4.4% y-o-y, moderating from the 10.8% expansion in the previous quarter, supported mainly by the architectural & engineering, technical testing & analysis and other professional, scientific & technical services segments, which expanded from low bases a year ago. On a q-o-q seasonally-adjusted basis, the sector grew by 1.2%, extending the 0.9% growth in the preceding quarter. 

Meanwhile, the administrative & support services sector contracted by 1.3% y-o-y, following the flat growth recorded in the second quarter, but expanded marginally by 0.2% on a q-o-q basis.  The “other services industries” grew by 4.4% y-o-y, slower than the 16.1% growth in the preceding quarter. On a q-o-q seasonally-adjusted basis, the sector expanded by 1.1%, a reversal from the 1.7% contraction in the 2Q.

In its economic outlook for 2021, MTI has narrowed its GDP growth forecast for 2021 from between 6% to 7% to “around 7%”. The updated forecast takes into account the performance of the Singapore economy in the first three quarters as well as the latest external and domestic developments.

For 2022, MTI forecasts the Singapore economy to grow by 3% to 5% in 2022. The recovery of various sectors in the economy is expected to remain uneven amidst the backdrop of easing border restrictions.

UOB economist Barnabas Gan notes that 3Q2021 GDP growth of 7.1% is in line with his expectations. He notes that Singapore’s economic prognosis has been favourable since the start of the year, supported by its export and manufacturing sectors. 

"We continue to stay positive on Singapore’s economic outlook in 4Q2021, where we pencil GDP growth at 4%. This will translate into a full-year growth of 6.8% in 2021, up from our previous outlook of 6.5%," he says. For 2022, he keeps his growth outlook for Singapore at 3.5%.

JP Morgan's Sin Beng Ong has revised his 2021 growth forecast to 7% from 6.5% previously, consistent with the upward revised MTI forecast. For 2022, he maintains his growth forecast of 5%. 

He anticipates recovery to broaden in late 2021 through to 2022. "We expect that the ongoing shift towards an endemic equilibrium and accompanying improvement in mobility and travel-related flows will lift both the demand side, especially domestic services and travel-related services, and also reduce the constraints on the supply side, especially in sectors reliant on foreign workers including construction," he says.

Selena Ling, head of treasury and research strategy at OCBC Bank, notes that 3Q2021 growth beat her expectations. "The better-than-expected performance can be attributed to a sterling performance in not only manufacturing, but also construction and services sectors which expanded 7.2%, 66.3% and 6.3% y-o-y respectively," she remarks.

Ling notes that MTI's updated forecast for 2021 brings it to the higher end of its initial estimates. "What was remarkable about this upward revision in the 3Q2021 GDP growth revision is that the return to Phase 2 (Heightened Alert) from 22 July to 18 August to contain the Covid clusters did not make as much of a dent on the Singapore economy as initially expected as momentum accelerated in September," she comments.

She also notes that even if 4Q2021 GDP moderates slightly to around the 5% y-o-y handle,  full-year growth would still be at a "stellar" 7.2%. "The 2022 official GDP growth forecast of 3%-5% is in line with our expectations," she adds.

Meanwhile, CGS-CIMB Group Research economist Terence Lee has reiterated his growth forecast of 6.6% for 2021 and 4.3% for 2022.

While Lee believes Singapore is poised for a "strong finish" for the remainder of the year, he cites four main risks MTI has highlighted may arise from the global economy -- concerns over waning efficacy of vaccines and more virulent mutations of the virus; protracted disruptions to global supply chains; rising energy and commodity prices which may lead to central banks increasing interest rates prematurely; and geopolitical tensions that could impact trade.

Photo: Bloomberg