Singapore growth rebounds to fastest in more than a decade

The main impetus that will continue to drive its economic recovery and growth will be services – senior economist.
The central business district of Singapore. Image: Lauryn Ishak, Bloomberg

Singapore’s recovery accelerated in the final three months of 2021, with easing virus restrictions and strong manufacturing helping push the economy to its fastest full-year growth in more than a decade.

Gross domestic product expanded 2.6% on a seasonally adjusted basis from the previous three months, according to advance estimates Monday from the Ministry of Trade and Industry, beating a median 2.1% forecast in a Bloomberg survey of economists.

That last quarter pick up helped propel growth for the full year to 7.2%, the fastest since 2010, after a 5.4% contraction in 2020. Economists had forecast an expansion of 7.1%, while the trade ministry in November said it expected “about 7%.”

“Singapore is firmly on the recovery path” with the manufacturing and services sectors driving growth, said Irvin Seah, senior economist at DBS Bank Ltd. “The main impetus that will continue to drive Singapore’s economic recovery and growth will be services” as high vaccination rates prompt the government to further ease measures, he said.

The Singapore dollar traded down 0.1% at 1.3501 to the U.S. dollar as of 10:56 a.m. local time, reversing earlier gains after the data was released. The benchmark Straits Times Index advanced 0.3%.

After recovering from the worst of the pandemic, the rapid spread of the omicron variant and an economic slowdown in China — Singapore’s largest trading partner — are now clouding the outlook for the city-state, which is highly reliant on global trade.

What Bloomberg Economics Says…
“The more important take-away from the advance estimate is that activity was able to accelerate in the face of the city-state’s largest and most deadly Covid-19 wave. That is an encouraging signal for 2022’s growth outlook, especially with omicron spreading more rapidly across Asia.”

– Tamara Mast Henderson, Asean Economist

Still, Singapore appears to be sticking with its gradual reopening path, with Prime Minister Lee Hsien Loong saying Friday in a New Year’s message that it can be “quietly confident” about coping with the impact of omicron. The Southeast Asian nation expects to grow 3% to 5% this year, Lee said, reiterating an earlier forecast from the trade ministry.

“Even if renewed waves of infections force the government to tighten social distancing measures again, widespread vaccination coverage should reduce the need for severe restrictions,” Barclays Plc economist Brian Tan wrote in a research note. The economy is likely to outperform the rest of Southeast Asia despite lagging North Asia’s recovery, he said.

The robust rebound, coupled with rising consumer prices, has reinforced expectations the Monetary Authority of Singapore will further tighten policy at its April meeting, analysts at Barlcays and Goldman Sachs Group Inc. said.

The economy last quarter grew 5.9% from the same period a year ago, the trade ministry also said Monday, compared with a median estimate of 5.1% in a Bloomberg survey.

Details of the year-on-year performance by sector in 2021 include:

  • Manufacturing grew 12.8%, compared to 7.3% the previous year
  • Construction rose 18.7%, compared to a previous contraction of 35.9%
  • Services advanced 5.2%, compared to a 6.9% decline in 2020

© 2022 Bloomberg L.P.

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