Singapore's GDP growth eases in Q1, but economists still positive on overall outlook

THOUGH Singapore's economy eased in the first quarter of 2022, most private-sector economists are still optimistic about its overall economic outlook and expect growth to pick up as soon as the next quarter.

However, economists Chua Hak Bin and Lee Ju Ye from Maybank took a more pessimistic view. They expect the Ministry of Trade and Industry (MTI) to downgrade its gross domestic product (GDP) forecast range to 2 to 4 per cent, from 3 to 5 per cent, when the final Q1 estimate is released.

Singapore's economy grew 3.4 per cent in Q1, according to advance estimates from MTI on Thursday (Apr 14).

The Q1 growth figure came 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.

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.

Even so, observers expect economic growth to pick up as soon as Q2.

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.

She 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.

Barclays regional economist Brian Tan also maintained his GDP growth forecast of 4.9 per cent for 2022, which is near the top end of MTI's official forecast range of 3 to 5 per cent.

"With Covid-19 infections falling and the government relaxing both domestic and international restrictions, we expect a more notable pickup in Q2 GDP," he said.

UOB economist Barnabas Gan was also sanguine on Singapore's overall economic outlook. "Recent high-frequency numbers continued to paint a resilient growth picture for Singapore for the year ahead. This included non-oil domestic exports which expanded for its 15th month straight in February, while industrial production surged 17.6 per cent year on year in the same month and marked the fastest growth pace since June 2021," he said.

However, Maybank's Chua and Lee believe that the Republic's growth outlook has been darkened by higher energy prices, manufacturing supply chain disruptions, a weaker EU economy, and China's lockdowns.

As such, they maintain their full-year GDP forecast at 2.8 per cent, below the government's official forecast.

Moody's Analytics economist Denise Cheok similarly noted that though the immediate risks from the pandemic have largely receded, supply-chain bottlenecks persist.

Russia's invasion of Ukraine has also thrown a wrench in the economy's rebound, she added. "Although Singapore has little direct trade with Russia and Ukraine, the disruptions to supply chains will reverberate through global trade lines, upon which Singapore is highly dependent.

"Increasing uncertainty will also weigh on consumer and business sentiment, dampening growth in professional services," said Cheok.

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 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 continues to be weighed 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 from the information and communications, finance and insurance and professional services sector, which collectively grew 5.3 per cent, though this was a moderation from the previous quarter's 6.6 per cent growth.

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