The Singapore economy grew by 0.2 per cent on a year-on-year basis in the first quarter of this year, rebounding from the 2.4 per cent contraction in the previous quarter, according to advance estimates released by the Ministry of Trade and Industry (MTI) on Wednesday (14 Apr).
On a quarter-on-quarter seasonally adjusted basis, the country’s economy expanded by 2.0 per cent, extending the 3.9 per cent expansion in the preceding quarter.
The expansion in Singapore’s economy was driven by the manufacturing sector, which grew by 7.5 per cent on a year-on-year basis in the first quarter, supported by output expansion in the electronics, precision engineering, chemicals and biomedical manufacturing clusters.
The construction sector shrank by 20.2 per cent on a year-on-year basis in the first quarter, improving from the 27.4 per cent decline in the fourth quarter of 2020.
MTI stated that the improved performance came on the back of a pickup in public and private sector construction activities in the first quarter as compared to the previous quarter.
The wholesale and retail trade, as well as transportation and storage sectors, shrank by 4.1 per cent in the first quarter, moderating from the 6.4 per cent decline in the previous quarter.
“The contraction recorded for this group of sectors was due to continued weakness in the transportation & storage sector, which was in turn primarily caused by the impact of the ongoing COVID-19 pandemic on the air transport, water transport and land transport segments,” it noted.
Meanwhile, the information and communications, finance and insurance, including professional services sectors collectively expanded by 3.7 per cent in the first quarter.
MTI said the growth was supported by healthy expansions in the information and communications as well as finance and insurance sectors, even as the professional services sector declined.
“The latter was due in part to weak economic activity in the region, as well as sluggish domestic construction activity, which had weighed on the architectural & engineering segment of the sector,” it added.
The remaining group of services sectors – accommodation and food services, real estate, administrative and support services and other services industries – declined by 3.9 per cent, improving from the 9.9 per cent contraction in the previous quarter.
“All sectors within the group, except for accommodation, contracted as activities in these sectors continued to be weighed down by constraints arising from the implementation of safe management measures.
“The accommodation sector expanded from a low base and was supported by domestic demand as tourism demand stayed weak. Nonetheless, the level of activity in the sector remained significantly below pre-pandemic levels,” said MTI.
MAS leaves monetary policy unchanged on low core inflation outlook
Separately, the Monetary Authority of Singapore (MAS) on Wednesday said it will maintain the monetary policy in view of a weak core inflation outlook.
In a statement, MAS said it kept the Singapore dollar’s rate of appreciation at 0 per cent per annum of its policy band, “with no change to the width of the policy band or the level at which it was centred”.
“This policy stance was assessed to be appropriate in view of the weak outlook for core inflation. While core inflation was expected to rise and gradually turn positive this year, it would stay well below its long-term average,” it noted.
The Economist Intelligence Unit (EIU) Asia country analyst, Liuqing Yu, opined that “moderate price pressure” and “a not fully-realised recovery” recently have allowed the MAS to leave its loosening monetary policy stance unchanged.
“We expect price pressure to build up gradually from April, as the price of global energy and non-energy commodities grow markedly and domestic demand recovers.
“This, along with an anticipated accelerated recovery, will allow the MAS to shift its monetary policy stance back to neutral (a mild appreciation of the policy band) at its October assessment,” he said in a statement.
The analyst expected a 4.8 per cent growth in the country’s economy this year.
“The economy has benefited primarily from a pickup in manufacturing activities, especially in electronics and biomedical products output. Infocomm and financial service sectors also registered strong growth. We expect this trend to continue throughout 2021,” he stated.
As evidenced by retail activities and mobility data, retail and recreational service remains weaker than the last quarter despite relaxation of social restrictions, said Mr Yu.
“We expect these activities to pick up more substantially only from the second half of 2021, with the vaccines becoming more readily available. A relaxation of workplace restrictions from early April will also benefit retail activities from the second quarter,” he added.
Mr Yu also noted that construction activities are expected to continue recovering throughout the year.