Singapore Q1 GDP up by 3.7% but external demand outlook is weaker now: MTI
Annabeth Leow
THE Singapore economy expanded by 3.7 per cent year on year in the first quarter of 2022, with uplift from the manufacturing, finance and insurance, and professional services.
Still, the external demand outlook “has weakened compared to 3 months ago”, the Ministry of Trade and Industry (MTI) said in a statement on Wednesday morning (May 25).
The MTI has kept its full-year growth forecast of between 3 per cent and 5 per cent, but added that the print is “likely to come in at the lower half of the forecast range”.
“You don’t need to be a mathematician – that’s between 3 to (sic) 4,” Permanent Secretary for Trade and Industry Gabriel Lim quipped at a morning briefing. He called the forecast range appropriate “at this point in time”, but also said: “More importantly, there are downside risks, so we’ll have to watch that part very carefully.”
The ongoing Russian war in Ukraine and potential escalation of the conflict were identified as key downside risks for the economy, alongside deteriorations in the Covid-19 pandemic, as well as the possibility of faster-than-expected monetary policy tightening in advanced economies.
As such, the ministry flagged a softer outlook for some outward-oriented sectors, such as the chemicals cluster, wholesale trade, and water transport, amid risks such as an economic slowdown in China and prolonged supply disruptions and port congestions worldwide.
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That’s even as aviation- and tourism-related and consumer-facing industries are expected to strengthen on the easing of Covid-19 curbs, while electronics is tipped to grow “more strongly than earlier projected” on global demand for semiconductors, cloud services and data centres.
The latest growth in gross domestic product (GDP) growth – while easing from 6.1 per cent in the final 3 months of 2021 – is higher than earlier official flash estimates of 3.4 per cent, as manufacturing, construction and services all outperformed advance data.
Manufacturing grew by 7.1 per cent in the January-to-March period, compared with 15.5 per cent in the quarter prior, as expansions in electronics, transport engineering, general manufacturing and precision engineering offset declines in chemicals and biomedical output.
Construction added 2.1 per cent, compared with 2.9 per cent growth in the previous quarter, on a pick-up in both public and private-sector construction activities.
The services sector expanded by 4.2 per cent, against 4.4 per cent in the quarter before. Growth was broad-based, even as the expansion moderated in information and communications, finance and insurance, transport and storage, and wholesale trade.
Meanwhile, retail trade, food and beverage services, professional services, and real estate services all saw the pace of growth increase. The accommodation services segment was the only industry in the red, extending previous quarters’ contractions to shrink by 13.5 per cent.
Said the MTI: “The weak performance of the sector was due to a pullback in government demand for quarantine and stay-home notice dedicated facilities, which more than offset an increase in tourism demand as visitor arrivals rose with the gradual easing of travel restrictions.”
On a seasonally adjusted, quarterly basis, the economy was up by 0.7 per cent in the first quarter, cooling from the 2.3 per cent growth notched in the fourth quarter of 2021.
Lim told reporters: “Since our last media briefing in February, the external economic environment has unfortunately deteriorated, due in part to the Russia-Ukraine conflict.
“In particular, the conflict has disrupted the supply of energy, food and other commodities, thereby exacerbating global inflationary pressures and adversely affecting the growth of many economies, including the euro zone. Meanwhile, stringent measures implemented in China to contain its domestic Covid-19 outbreaks are likely to weigh on its economy and contribute to global supply bottlenecks.
“Consequently, global supply disruptions are projected to be more severe and prolonged than earlier expected, potentially persisting throughout 2022. This, in turn, is likely to constrain production and dampen GDP growth in some external economies by more than we had previously projected.”
Still, some analysts suggested that the official forecasts are on the conservative side.
Barclays economist Brian Tan continued to project full-year growth of 4.9 per cent, adding: “The MTI's ‘lower half’ base case is relatively cautious, in our view, and appears to assume at least a quarter of sequentially declining GDP some time this year…
“Our forecast represents a solid economic recovery, as the strength of 2021 GDP growth was exaggerated by the outsized base effects arising from the initial impact of the pandemic in 2020.”
Meanwhile, JPMorgan economic and policy research analyst Ong Sin Beng downgraded the house’s growth estimate to 4.3 per cent, from 5 per cent before – but still in the upper part of the official forecast range.
But Irvin Seah, senior economist at DBS, said that the MTI’s forecast was “smack in line” with his team’s “long-held below-consensus forecast” of 3.5 per cent growth.
“Growth momentum (quarter on quarter, seasonally adjusted) in the key manufacturing sector has dipped marginally into the red (-0.2 per cent), the first decline after 4 consecutive quarters of expansion,” he said in a note.
“Though this is likely part and parcel of the normalisation process, downside risk is emerging, which could take further toll on this key engine of recovery.”
Separately, Singapore’s non-oil domestic exports (NODX) expanded by 11.4 per cent in the first quarter, compared with 20.1 per cent in the 3 months prior. Trade agency Enterprise Singapore has upgraded its full-year NODX forecast to growth of between 3 per cent and 5 per cent.
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