SINGAPORE: Singapore's economy grew by 7.1 per cent year-on-year in the third quarter of 2021, beating expectations, but still slower than the 15.2 per cent growth recorded in the previous quarter.
Analysts had expected a 6.5 per cent increase for Q3, according to a Reuters poll.
In data released on Wednesday (Nov 24), the Ministry of Trade and Industry (MTI) also narrowed the GDP growth forecast for 2021 to about 7 per cent, from the previous 6 to 7 per cent.
This is based on the performance of the Singapore economy in the first three quarters of the year, as well as the latest external and domestic economic developments, said the ministry.
GDP growth in the first three quarters of 2021 came in at 7.7 per cent.
The Q2 figure of 15.2 per cent was "largely due to the low base" in the same quarter of 2020 when GDP fell by 13.3 per cent due to the Circuit Breaker measures put in place from Apr 7 to Jun 1, as well as the sharp fall in external demand during the COVID-19 pandemic.
"These factors would also explain the strong year-on-year growth seen in the second quarter of 2021 for sectors such as construction, retail trade and food & beverage (F&B) services," said MTI.
All clusters within the manufacturing sector, with the exception of the biomedical manufacturing cluster, expanded during the third quarter.
The manufacturing sector grew by 7.2 per cent year-on-year, moderating from the 17.9 per cent growth in the previous quarter.
The electronics and precision engineering clusters, in particular, continued to post "healthy growth" amid "robust" global demand for semiconductors and semiconductor equipment respectively.
The construction sector rose by 66.3 per cent year-on-year, slowing from the 117.5 per cent growth in the previous quarter, as both public and private sector construction output rose.
"The strong growth during the quarter was mainly because of low base effects given the slow resumption of construction activities after the Circuit Breaker period last year," said MTI.
The wholesale trade sector grew by 5.9 per cent year-on-year, led by the machinery, equipment and supplies segment. This was in turn bolstered by the strong wholesale sales of electronic components, telecommunications equipment and computers.
The retail trade sector grew by 0.7 per cent, supported by an increase in non-motor vehicle sales volumes, even as motor vehicle sales fell due to a reduction in Certificate of Entitlement (COE) quotas.
Growth in the transportation and storage sector slowed to 8.2 per cent year-on-year. Within the sector, the air transport segment recorded strong growth, mainly due to an increase in air passengers handled from a low base in the same quarter in 2020.
However, the water transport segment "grew marginally", due to slower growth in the volume of sea cargo handled at Singapore's ports, said MTI.
The accommodation sector fell 4.1 per cent year, a reversal from the 15.8 per cent growth in the previous quarter.
"The performance of the sector was weighed down by continued weak visitor arrivals due to travel restrictions, even though demand from the government for hotel rooms to serve as quarantine facilities provided some support to the sector," said MTI.
The food and beverage sector (F&B) fell 4.2 per cent year on year, compared to the 36.9 per cent growth in the second quarter.
The sector's performance was "adversely" affected due to tighter dine-in and event restrictions during the quarter, including dine-in services not allowed during the Phase 2 (Heightened Alert) period.
"In particular, restaurants and food caterers saw a fall in sales volumes, even as the sales volumes of fast food outlets, and cafes, food courts and other eating places rose," said MTI.
The information and communication sector grew by 10.4 per cent year on year, with growth largely driven by the IT and information services segment, which benefitted from "strong" demand for enterprise IT solutions.
The finance and insurance sector recorded a growth of 9 per cent year-on-year, supported mainly by an expansion in the insurance segment.
The real estate sector grew 16.8 per cent year-on-year, primarily supported by the private residential property segment. However, the performance of the commercial property segment "continued to be sluggish", said MTI.
The professional services sector grew by 4.4 per cent year-on-year. Growth was mainly supported by the architectural and engineering, technical testing and analysis, as well as other professional, scientific and technical services segments.
The administrative and support services sector fell by 1.3 per cent year-on year. Within the sector, the rental and leasing segment shrank as travel restrictions affected the rental and leasing of air transport equipment.
The “other services industries” grew by 4.4 per cent year-on-year.
Within the sector, the education, health and social services, public administration and defence, as well as "others" segments grew.
The "others" segments in the other services industries include membership organisations, repair of computers, vehicles and personal and household goods, as well as other personal service activities such as personal care, weddings and funerals.
However, the arts, entertainment and recreation segment contracted. This was due to Phase 2 (Heightened Alert) measures re-introduced, the phased relaxation of restrictions thereafter, as well as the slow recovery in visitor arrivals.
ECONOMIC OUTLOOK FOR 2021
"Since the Economic Survey of Singapore in August, the global economy has performed broadly in line with expectations," said MTI.
Domestically, travel and domestic restrictions have "continued to weigh" on the recovery of aviation- and tourism-related sectors such as air transport and the arts, entertainment and recreation sectors, as well as the F&B sector and retail trade sector.
However, growth in sectors such as electronics, as well as finance and insurance, has been stronger than expected, bolstered by "robust" demand for semiconductors, and insurance and fund management services.
The recent easing of border restrictions on the entry of migrant workers from South Asia and Myanmar will also alleviate some of the ongoing labour shortages in the construction and marine and offshore engineering sectors, and support their recovery, said the ministry.
As for the external economic environment, MTI said that the US and key Eurozone economies have sustained their economic recoveries. This was helped by high vaccination rates and the start of booster shots, which meant they have "largely removed" restrictions even amid the spread of the Delta variant.
In contrast, COVID-19 outbreaks and restrictions being reimposed meant the recoveries of key Southeast Asian economies were disrupted. But some of these restrictions were being gradually lifted as their respective domestic health situations stabilise.
MTI added that economic growth in China is expected to come in slower than "earlier anticipated", due to its property market downturn, energy crunch, as well as "sluggish" consumption growth amid periodic local COVID-19 outbreaks that led to restrictions imposed to contain them.
SINGAPORE ECONOMY EXPECTED TO GROW BY 3 TO 5 PER CENT IN 2022
Singapore's economy is expected to grow by 3 per cent to 5 per cent in 2022, according to MTI projections.
The country's high vaccination rate and steady rollout of booster shots will continue to help with the easing of domestic and border restrictions, which will support the recovery of consumer-facing services and alleviate labour shortages in sectors reliant on migrant workers, the ministry added.
Air travel and arrivals are also expected to improve with the easing of travel restrictions and expansion of vaccinated travel lanes.
"Against this backdrop, the recovery of the various sectors of the economy in 2022 is expected to remain uneven," said MTI.
The growth prospects for outward-oriented sectors such as manufacturing and wholesale trade remain strong given robust external demand, it added.
The manufacturing sector is projected to continue to expand, with growth in the electronics and precision engineering clusters supported by sustained global demand for semiconductor and semiconductor equipment respectively.
Growth in the information and communications, as well as finance and insurance sectors are expected to be driven by "healthy" demand for IT and digital solutions, as well as credit and payment processing services.
However, recovery for aviation- and tourism-related sectors is likely to be gradual, said MTI. The ministry cited global travel demand will take time to recover and travel restrictions could persist in key source markets.
The accommodation sector would also be weighed down by a projected decline domestically as government demand tapers, and lower staycation demand as travel restrictions are relaxed.
"Overall, activity in these sectors is expected to remain below pre-COVID levels throughout 2022," said MTI.
Consumer-facing sectors, such as retail trade and F&B services, are projected to recover. MTI cited the progressive easing of domestic restrictions and improved consumer sentiments amid a "gradual turnaround" in labour market conditions.
"Nonetheless, the (value-added) of the food & beverage services sector is not likely to return
to pre-COVID levels by end-2022 as some dine-in and event restrictions could remain in place, while the recovery in visitor arrivals is expected to be slow," said MTI.
Similarly, while the value-added of the retail trade sector is projected to return to pre-COVID-19 levels by end-2022, some segments such as department stores are likely to remain lacklustre, in part due to weak visitor arrivals.
Activities in the construction, marine and offshore engineering sectors are expected to recover, as border restrictions on the entry of migrant workers from South Asia and Myanmar are gradually relaxed.
"Nonetheless, as it will take time to fully address the shortfall in labour required to meet business needs, labour shortages are likely to continue to keep the output of the two sectors below pre-pandemic levels in 2022," said MTI.
ECONOMIC GROWTH EXPECTED TO BE "MODERATE"
As for the external economic environment, MTI projected that GDP growth in most advanced economies for 2022 is expected to be moderate, compared to 2021 but remain above pre-pandemic trend rates.
In contrast, key Southeast Asian economies are projected to see "faster" growth next year, as they progressively resume more economic activities.
"Meanwhile, supply bottlenecks and disruptions could continue to weigh on industrial production in some external economies in the near term," said the ministry.
Economic growth in the US is projected to be moderate in 2022, although remaining above its pre-pandemic trend rate.
Stronger labour market conditions, along with elevated savings from previous fiscal stimulus packages, are expected to bolster consumer spending, said MTI.
Nonetheless, a reduction in the amount of fiscal stimulus likely to be disbursed in 2022 as compared to this year, as well as lingering supply disruptions, could pose a drag on growth.
Similarly in the Eurozone, GDP growth in 2022 is expected to be moderate but remain "above trend".
"Sustained improvements in labour market conditions and firm consumer confidence will continue to support domestic demand, even though industrial production is likely to be weighed down by supply
bottlenecks in early 2022," said MTI.
As for Asia, China's growth is projected to slow due to its property market downturn, constraints imposed on energy use, as well as a zero-COVID policy which could dampen consumption growth.
However, GDP growth in key Southeast Asian economies such as Malaysia, Thailand and Indonesia is expected to pick up alongside improvements in domestic demand, following the fall in COVID-19 infections in recent months, further progress in vaccine rollout and sustained external demand.
"At the same time, downside risks in the global economy remain," said the ministry.
The trajectory of the pandemic remains a risk. While vaccination rates have picked up in many economies, waning vaccine efficacy and potential virus mutations are a concern.
"Hence, even in economies with high vaccination rates and booster rollouts, infections could still rise and weaken their recovery," said MTI.
The ministry added that global industrial production may be constrained for longer, if global supply disruptions are "more protracted" than expected due to further outbreaks, logistical or production constraints.
Furthermore, protracted supply disruptions alongside a stronger pickup in demand, as well as rising energy commodity prices, could lead to more "persistent" inflation, said MTI.
"This could in turn result in an earlier or larger increase in interest rates than anticipated, thereby triggering a tightening of global financial conditions."
MTI added that continued geopolitical uncertainty involving the major economies could weigh on trade and global economic recovery.