Singapore's GDP grew 3.4% in Q1, falling below economists' expectations

SINGAPORE'S economy grew 3.4 per cent in the first quarter of 2022, according to advance estimates from the Ministry of Trade and Industry (MTI) on Thursday (Apr 14).

The Q1 growth figure came just below economists' expectations of a 3.8 per cent expansion, according to a recent Bloomberg poll, and moderated from the 6.1 per cent growth in the fourth quarter of last year.

Yu Liuqing, country analyst for Asia at the Economist Intelligence Unit, said the slowdown in year-on-year growth in Q1 was expected given the stronger statistical base in the same quarter a year ago.

Nevertheless, OCBC chief economist Selena Ling expects Singapore's GDP to pick up in the coming quarters as the Republic continues to ease border control measures and domestic Covid-19 restrictions, which would benefit the services sector. 

"The Monetary Authority of Singapore tips that Singapore’s output gap should turn slightly positive as aggregate GDP has fully recovered to pre-Covid levels," she added. Ling foresees Q2 growth to come in at around 4.7 per cent year on year, and expects full-year growth to still come in within the official forecast of 3 to 5 per cent.

On a quarter-on-quarter seasonally adjusted basis, the economy grew 0.4 per cent in Q1, below economists' expectations of 0.9 per cent growth and slower than the 2.3 per cent growth in Q4.

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

Growth for all sectors moderated in the first quarter. The manufacturing sector grew 6 per cent year on year in the first quarter of 2022, but slowed down from the 15.5 per cent growth recorded in the previous quarter. This was supported by output expansions in all clusters, except for the chemicals cluster. The electronics and precision engineering clusters continued to record strong output growth, said MTI, driven by the sustained global demand for semiconductors and semiconductor equipment respectively.

On a quarter-on-quarter seasonally adjusted basis, the manufacturing sector contracted by 1.2 per cent, reversing from the 6.3 per cent growth in Q4.

The construction sector grew by 1.8 per cent year on year in Q1, moderating from the 2.9 per cent growth seen in the preceding quarter. 

In absolute terms, the value-added of the sector remained 25.3 per cent below its pre-pandemic level as activity at construction sites continue to be weighted down by labour shortages, said MTI.

The sector expanded by 2.8 per cent on a quarter-on-quarter seasonally adjusted basis, turning around from the 2.1 per cent contraction recorded in Q4.

The services sector grew 3.9 per cent overall, slowing down from the 4.4 per cent growth recorded in the previous quarter. The strongest growth was by the information and communications, finance and insurance and professional services sector, which collectively grew by 5.3 per cent, though this was a moderation from the previous quarter's 6.6 per cent growth. 

All sectors saw moderated growth except for the accommodation and food services; real estate; administrative and support services; and other services sector, which grew 3 per cent in Q1, faster than the 1.6 per cent recorded in the previous quarter.

All sectors within this group expanded, with the exception of the accommodation and food services sector. MTI attributed its weak performance to the fall in government demand for hotel rooms to serve as quarantine facilities now that Singapore has transitioned to living with Covid-19.

Overall, the value-added for this group of services remained 4.3 per cent below its level in the first quarter of 2019. And on a quarter-on-quarter seasonally adjusted basis, the sectors expanded by 2.9 per cent in the first quarter, extending the 2.6 per cent growth in Q4.

The lifting of social and border restrictions is expected to aid the contact-intensive and tourism-related sectors, said Yu. "Price pressure, however, will squeeze the disposable income of households and suppress the pent-up demand for private consumption," he added.

He expects Singapore's GDP growth to reach 3.6 per cent in 2022.

Looking ahead, Ling believes the trade-related and modern services sectors will see more modest growth ahead, and that domestic consumption and public infrastructure investments are likely to drive growth in 2022.

READ MORE: MAS takes more aggressive 'double-barrelled' move to tighten monetary policy, raises inflation forecast