Photographer: Wei Leng Tay / Bloomberg
Photographer: Wei Leng Tay / Bloomberg
Singapore’s economy was slowly recovering from the worst slump in the country’s history, with pillars such as trade and tourism hammered by the coronavirus pandemic.
Gross domestic product grew by 2.1% on a seasonally adjusted basis in the past quarter compared to the previous three months, according to earlier estimates from the Department of Trade and Industry released Monday. Driven by quarterly earnings in construction and services, the increase exceeded the median forecast of 1.3% in a Bloomberg survey of economists.
Over the year, the city-state’s economy shrank by 5.8%. While this is better than the 6% drop expected by economists, it is the worst result since independence more than half a century ago and the first annual contraction since 2001.
The performance is “certainly encouraging as they came out better than expected for both the fourth quarter and the full year thanks to the upward revision from the third quarter,” said Selena Ling, head of Treasury Research and Strategy at Oversea-Chinese Banking Corp. in Singapore. With vaccinations underway and a further relaxation of restrictions at the end of December, “hopefully we will see Singapore’s economy continue to stabilize and regain a foothold in the first half of 2021 to produce more economic green shoots Bloom.”
Furthermore Singapore
Singapore appears to be recovering from its worst downturn since independence
Source: Singapore Department of Statistics, Ministry of Trade and Industry
The Singapore dollar rose 0.3% at S $ 1.3184 against the US dollar as of 10:25 am highest level since April 2018. The benchmark Straits Times Index has changed little that day.
As a small island nation heavily dependent on trade, Singapore’s growth depends on a global pandemic recovery – but even then, challenges will remain as vaccines are rolled out locally.
Singapore sees an uneven recovery in 2021 after its worst downturn on record
“The government has done everything in its power to support our employees and companies to avoid massive job losses and bankruptcies,” Prime Minister Lee Hsien Loong said in a New Year’s message on Dec. 31. “We look forward to a recovery in 2021, although the recovery will be uneven and activity is likely to remain below pre-Covid-19 levels for some time.”
What Bloomberg Economics Says …
“While activity continues to pick up, we do not expect a return to positive growth until the second quarter of 2021. A full recovery for this regional hub will require the normalization of global travel and trade, which we consider unlikely this year.”
– Tamara Mast Henderson, Asean economist
To read the full note, click here
Despite progress since the bottom of the downturn, significant challenges remain.
“A further recovery in domestic demand would likely be limited by the continued weakness in tourism and the severe slack in the labor market,” The economists Wei Zheng Kit and Kai Wei Ang of Citigroup Inc. wrote in a note. “We are also keeping a close eye on potential renewed waves of infection in the community, which could halt or even reverse the reopening process.”
Compared to a year earlier, the economy contracted 3.8% in the three months to December, the fourth consecutive quarter of contraction. The median estimate in a survey of economists was -4.7%.
In November, the ministry said it expected the economy to contract by 6% to 6.5% in 2020, before growing again by 4% to 6% this year, as travel restrictions and local security measures are expected to be relaxed.
U-shaped recovery
“The recovery will be more U-shaped than V, with GDP returning to pre-pandemic levels only in early 2022,” said Maybank Kim Eng Research Pte. economists Chua Hak Bin and Ju Ye Lee wrote in a research note. “Easing of border controls will happen at a snail’s pace, not at warp speed, and probably later, when herd immunity is achieved in most developed economies.”
Other details of Monday’s release:
- Production grew 9.5% compared to the same period last year, driven by output in electronics, biomedical manufacturing and precision engineering. The sector shrank 2.6% compared to the previous three months
- Construction fell 28.5% year-over-year, but 34.4% higher than the previous quarter as more projects resumed
- The wholesale and retail trade and transportation and storage sectors were down 11% year-on-year, but improved only marginally from the third quarter decline due to subdued global trade and air travel
- The information & communication, finance & insurance and professional services sectors grew 0.2% year-over-year, compared to a contraction of 0.2% in the third quarter
- Forward GDP estimates are largely calculated on the basis of data in the first two months of the quarter. A more complete estimate will be published next month, including industry performance, inflation, employment and productivity
– With the help of Myungshin Cho and Michelle Jamrisko
(Updates market levels in fifth paragraph, adds Bloomberg Economist quote in text box, analysts quote above bullet points.)