Singapore GDP beats expectations to grow 4.4% in Q3: flash estimates
Sharon See
SINGAPORE’S economy beat expectations and grew 4.4 per cent year-on-year in the third quarter, according to advanced estimates from the Ministry of Trade and Industry (MTI) released on Friday morning (Oct 14).
Q3’s gross domestic product (GDP) was a notch lower than the 4.5 per cent expansion recorded in the second quarter, which was revised slightly from the previous figure of 4.4 per cent.
On a seasonally adjusted quarter-on-quarter basis, the economy expanded 1.5 per cent, reversing the 0.2 per cent decline in Q2 and helping the Republic escape a technical recession, which is defined as two consecutive quarters of quarter-on-quarter contraction.
Both figures came as a surprise to private sector economists, who had expected a 3.5 per cent year-on-year growth and 0.7 per cent sequential expansion, according to a Bloomberg poll.
In August, MTI narrowed the range of its 2022 full-year growth forecast to 3 to 4 per cent, from a previous projection of 3 to 5 per cent.
Overall, the recovery of the services industry has helped to offset the slower growth in the manufacturing sector, which had helped the Singapore economy stay afloat during the Covid-19 pandemic.
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The manufacturing sector expanded 1.5 per cent year on year in Q3, easing from the 5.7 per cent growth in the previous quarter.
MTI noted that growth was supported by the transport engineering, general manufacturing and precision engineering clusters, which outweighed the decline in electronics and chemicals.
This is the slowest growth the sector has seen since Q2 2020, when it contracted 0.4 per cent during Singapore’s “circuit breaker” period at the height of the pandemic. Sequentially, manufacturing shrank 3.3 per cent, compared with the 0.4 per cent growth in Q2.
The construction sector grew 7.8 per cent year on year in Q3, improving the previous quarter’s 4.8 per cent growth. Month on month, it grew 3.9 per cent, faster than the 1.5 per cent expansion in Q2.
All segments of the services-producing industries recorded growth in Q3.
The wholesale, retail, transportation and storage cluster grew 6.2 per cent year on year, from 2.9 per cent the previous quarter. MTI noted that this was helped by low base effects, especially with domestic and travel restrictions now eased, compared with the same period last year.
The information and communications, finance and insurance and professional services cluster grew 4 per cent, easing from the earlier quarter’s 4.7 per cent growth.
The accommodation and food services, real estate, administrative and support services as well as other services cluster saw an expansion of 9.2 per cent, extending Q2’s 7.6 per cent growth.
Vishnu Varathan, head of economics and strategy for Asia and Oceania at Mizuho Bank, Q3’s performance “underscores critical service sector support but does not distract from building global headwinds in manufacturing and exports that are already showing up in weak semi orders”.
Alex Holmes, senior economist at Oxford Economics, said although domestic demand would continue to be supported by an expanding labour force and robust nominal wage growth, it too will face headwinds.
Persistently high inflation and rising interest rates are set to eat into consumer spending power, he said.
“In all, we think Q3’s 1.5 per cent jump in GDP is unlikely to be repeated and that growth will slow sequentially over the coming quarters,” he said.
OCBC chief economist Selena Ling said the growth prognosis is for “below trend growth” in 2023, which will put the currently mildly positive output gap in reverse.
“Notably, the mention of the drag on economic activity from the globally synchronised tightening in monetary policy will intensify, and growth in our major trading partners will slow to below trend but stay positive, suggesting that prospects for Singapore’s manufacturing and some trade-related sectors have dimmed,” she said.
The mitigating factors, she added, are continued resiliency in domestic-oriented and travel-related sectors, underpinned by strong household balance sheets and the tight domestic labour market, which should see sustained wage growth, although this too may slow as foreign labour supply ramps up.
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