Q3 GDP growth skids to 6.5% in absence of circuit breaker effect in Q2

SINGAPORE'S economy grew 6.5 per cent year on year in the third quarter of 2021, easing from a jump seen in the previous quarter as a result of last year's low base, according to advance estimates from the Ministry of Trade and Industry (MTI) on Thursday morning (Oct 14).

This was just a notch lower than the 6.6 per cent growth that private-sector economists had expected, according to a recent Reuters poll.

Q2 saw a 15.2 per cent jump, which has been revised from 14.7 per cent. This was due to low base effects, as the country during the same period last year was in the midst of a 8-week “circuit breaker”, or partial lockdown.

Sequentially, the economy expanded 0.8 per cent in Q3, improving from the 1.4 per cent contraction in the preceding quarter.

All industries saw growth in Q3, although momentum has eased from Q2.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

The construction sector saw year-on-year growth surge 57.9 per cent, although this is far slower than the whopping 117.5 per cent expansion in Q2. Quarter on quarter, the sector's contraction slowed to 0.4 per cent in Q3, compared with 2.4 per cent in the previous quarter.

MTI noted that the value-added of the sector remained 25.1 per cent below its pre-Covid-19 level, as construction activity continued to be weighed down by the labour crunch and border restrictions.

The manufacturing sector grew 7.5 per cent year on year, easing from Q2's 18 per cent. Sequentially, the sector was flat in Q3, improving from the 2.1 per cent contraction in the preceding quarter.

Growth during this quarter was supported by output expansions in all clusters, other than the chemicals cluster, said MTI.

It added that the electronics and precision engineering clusters in particular continued to post strong growth, driven by sustained global demand for semiconductors and semiconductor equipment.

The services sector expanded 5.5 per cent year on year in Q3 on the whole, slowing from the previous quarter's 10.8 per cent. On a quarter-on-quarter basis, the service-producing industries grew 0.5 per cent, up from Q2's 0.3 per cent contraction.

Within the sector, the cluster of infocomm and communications, finance and insurance and professional services registered the best showing with a 7.7 per cent expansion, although this was moderated from the previous quarter's 10.1 per cent growth. Quarter on quarter, this cluster grew 1.2 per cent, down from the previous quarter's 2.3 per cent.

Priyanka Kishore, head of India and South-east Asia economics at Oxford Economics, said she is expecting the services sector to continue to rebound from a very low base, given that Singapore's border controls are easing despite retightened domestic restrictions.

"Retail, transportation and storage sectors would benefit from further reopening of borders. The professional services sector would also benefit as the economic activity in the region picks up again," Kishore said, adding that growth momentum should pick up further in Q4.

Yu Liuqing, country analyst at The Economist Intelligence Unit, said the "heightened alert" measures, which avoided a mass shutdown of businesses, have been "less economically damaging than before", and firms were able to quickly pivot their operations.

Singapore was on "heightened alert" from mid-May to mid-August, with the authorities tweaking curbs on social gatherings and dine-ins every few weeks amid a rise in Covid-19 cases.

Jamus Lim, an economist from ESSEC Business School Asia Pacific, noted however that the domestic rebound in Q3 occurred in a "somewhat diminished global economic picture", due to the marked slowdown in the Chinese economy and a more pessimistic outlook for the US, both of which have been major global growth drivers this year.

"Still, while the Delta variant did wreak havoc around the world, including in the immediate neighborhood of South-east Asia, the worst of the shock appears to be behind us, as regional governments ramp up vaccination programmes and commit to reopening their economies," said Lim.

"On balance, then, the external sector should continue to offer positive tailwinds for the Singapore economy as it enters the final quarter of the year," he added.

READ MORE: MAS tightens Singdollar policy ahead of expectations, as inflation climbs