Singapore’s economy grows 4.8% year on year in Q2 but flat sequentially: flash estimates

THE Singapore economy grew by 4.8 per cent year on year in the second quarter of 2022, picking up from 4 per cent in the 3 months prior, according to flash data out on Thursday (Jul 14).

But on a seasonally adjusted, quarterly basis, gross domestic product (GDP) was flat on the quarter before, compared with the growth of 0.9 per cent seen in the first quarter, said the Ministry of Trade and Industry (MTI).

In May, MTI had previously reiterated its projection for full-year GDP growth of between 3 per cent and 5 per cent – though growth will likely come within the lower half of that range.

Noting that sequential growth in the second quarter “narrowly averted a decline”, DBS senior economist Irvin Seah said in a report: “This is in line with our long-held view that there will be spillover effects from a slowdown in China and pickup in global uncertainties and increasingly tighter monetary conditions.”

The Monetary Authority of Singapore (MAS) on Thursday said that “the Singapore economy remains on track to expand at a creditable pace in 2022, though with slowing momentum”, especially in trade-related sectors, even as domestic-oriented and travel-related sectors are expected to support growth.

Still, the MAS flagged the risk of “a more significant slowdown in Singapore’s key trading partners” in 2023, amid high inflation and central bank tightening.

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“In tandem with a weaker global economic environment, Singapore’s GDP growth is expected to moderate further in 2023,” it said in its policy statement.

The latest advance GDP estimates are based mainly on data from April and May. More comprehensive figures for the second quarter will be available in August.

Second-quarter growth was buoyed by construction, which grew by 3.8 per cent year on year, up from 1.8 per cent in the quarter before, on a pickup in activity as migrant workers returned.

But, in absolute terms, the value-added of the construction sector remained 23.7 per cent below its pre-pandemic levels “due to continued labour shortages”, MTI noted in its report.

Quarter-on-quarter growth also slowed to 1.9 per cent, from 2.9 per cent in the first quarter.

The overall services sector expanded by 4.7 per cent year on year, compared with 4.3 per cent previously, on slowdowns in wholesale and retail trade and transportation and storage, as well as information and communications, finance and insurance, and professional services.

On a sequential, seasonally adjusted basis, the services sector added 0.2 per cent quarter on quarter, down from its previous growth of 1.8 per cent.

The value-added in wholesale and retail trade and transportation and storage remained 2 per cent below pre-pandemic levels, while the value-added in accommodation, food, real estate, administrative and support, and other services was 2.7 per cent below pre-pandemic levels.

That’s even though the relaxation of domestic and border restrictions from end-April onwards propelled these industries to markedly faster year-on-year growth in the second quarter.

Meanwhile, manufacturing expanded by 8 per cent year on year, compared with 7.9 per cent previously, on higher output in all clusters except for biomedical manufacturing and chemicals.

“In particular, the electronics and precision engineering clusters continued to record strong output growth, driven by sustained global demand for semiconductors and semiconductor equipment respectively,” MTI said.

Still, quarterly growth in manufacturing cooled to 0.3 per cent, from 0.5 per cent before.

Despite the negative spillover from economic conditions in China, DBS’s Seah believes that the latest easing of pandemic-related restrictions in Singapore’s biggest trade partner could boost exports and the manufacturing sector, offering “some much-needed impetus”.

But he also wrote: “While the reopening of the borders and easing of measures will prompt better growth performance in the services sector, manpower crunch could potentially dampen the pace of recovery. The same situation is occurring in the construction sector as well.”

Chua Hak Bin and Lee Ju Ye, economists at Maybank, now expect MTI to downgrade its official GDP forecast to between 3 per cent and 4 per cent when the final second-quarter print comes out.

They have kept their own below-consensus forecast of 2.8 per cent for 2022, with “a steep deceleration in growth” to 1.4 per cent in the second half on the back of sharply slower global growth and tightening monetary conditions.

All the same, RHB senior economist Barnabas Gan maintained the forecast for GDP growth of 3.5 per cent in 2022, while Selena Ling, chief economist at OCBC, projected 3.5 per cent to 4 per cent.

“For the remainder of this year, the headwinds will centre on potentially higher consumer prices, cooling global trade demand and supply chain disruptions. Nonetheless, second-quarter GDP in real terms is already 6.4 per cent above 2019’s average, underlining that Singapore’s economy has recovered considerably from the Covid-19 trough,” said Gan.