Singapore Q2 GDP contracts from Q1 and pre-pandemic level; up 14% from last year's low base

SINGAPORE'S economy in the second quarter posted a 14.3 per cent year-on-year rebound due to the low base from last year when the Republic was in a "circuit breaker", according to advance estimates from the Ministry of Trade and Industry (MTI) on Wednesday.

The Republic's gross domestic product (GDP) fell a record 13.3 per cent in Q2 last year during its "circuit-breaker" period from April 7 to June 1.

Compared with the same period in 2019, however, GDP for the period between April and June was 0.9 per cent below its pre-pandemic level. On a quarter-on-quarter seasonally-adjusted basis, Singapore's GDP shrank 2 per cent in Q2, reversing the 3.1 per cent gain in the previous quarter.

Q2's showing came slightly below economist expectations, who had predicted a 14.8 per cent year-on-year jump and a 1.8 per cent quarter-on-quarter contraction, according to a Bloomberg poll.

The construction sector surged 98.8 per cent year on year, a drastic turnaround from the 23.1 per cent contraction in Q1. This was again a result of low-base effects as "circuit-breaker" measures had halted most construction activities in Q2 last year. In absolute terms, however, the sector remained 31.6 per cent below its pre-pandemic level in the same period two years ago.

The manufacturing sector grew 18.5 per cent in Q2, extending the first quarter's 11.3 per cent growth. According to MTI, growth was supported by output expansions in all clusters except the volatile biomedical manufacturing cluster.

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The electronics and precision engineering clusters in particular continued to see healthy growth due to robust global demand for semiconductor and semiconductor equipment respectively, the ministry added.

Among the services sector, the wholesale and retail trade and transportation and storage sectors grew 9.3 per cent in Q2, compared with a 1.7 per cent contraction in the previous quarter.

Meanwhile, the information and communications, finance and insurance and professional services sectors expanded 7.8 per cent, continuing Q1's 3.2 per cent growth.

The remaining group of services sectors, which include accommodation and food services, real estate and other services, grew 13.4 per cent, reversing the 3.8 per cent contraction from the preceding quarter.

On the whole, Q2's performance has placed Singapore's economic growth at 7.4 per cent year on year for the first half of 2021, and several economists believe this is paving the way for the official full-year growth forecast to be raised above the current 4 to 6 per cent bracket.

Barclays regional economist Brian Tan said he is expecting it to be raised to 6 to 8 per cent when MTI releases its next Economic Survey of Singapore in August.

"This is partly due to the favourable base effects; our projections suggest that full-year GDP growth would be on track to hit 5.1 per cent even if seasonally adjusted GDP remained flat at Q2 levels through the rest of this year," said Mr Tan, who is maintaining his 2021 forecast at 7 per cent.

Maybank Kim Eng economists believe the official growth forecast could be upgraded to 6 to 7 per cent.

At the same time, they have also raised their outlook from 6.2 per cent to 6.8 per cent, given the "stronger-than-expected manufacturing performance and rapid vaccine rollout".

UOB economist Barnabas Gan said he is upgrading his full-year growth forecast to 6.5 per cent, up from his earlier expectations of 5.5 per cent, owing to the "surprisingly strong performance in Q2 amid a rosier economic prognosis ahead".