Singapore—An article in the South China Morning Post (SCMP) on Tuesday (May 25) asks if the recession may just be over, given the 10.8 per cent growth in the manufacturing sector, along with the first quarter of growth after three successive quarters of contraction.
However, the potential effects of recent restrictions under Phase 2 (Heightened Alert), imposed in an effort to curb the growing number of Covid-19 infections, are leading some to wonder if this period of growth will continue.
The Ministry of Trade and Industry (MTI) announced in a press release on May 25 that “the economy expanded by 1.3 per cent on a year-on-year basis in the first quarter”, which is higher than the estimated 0.2 per cent.
The ministry added that this was a “reversal from the 2.4 per cent contraction in the previous quarter”, and that “on a quarter-on-quarter seasonally-adjusted basis, the economy grew by 3.1 per cent.”
And, as the SCMP article pointed out, trade-reliant Singapore is perceived by many as a bellwether for the economy worldwide.
The growth in Singapore’s economy is in large part due to improvement in the manufacturing sector, especially output expansions in the electronics, precision engineering and chemicals clusters. Expansion in these clusters exceeded losses in the transport engineering, general manufacturing and biomedical manufacturing clusters.
Moreover, on a quarter-on-quarter seasonally-adjusted basis, the growth of the manufacturing sector, at 10.8 per cent, shows a significant rebound from the 1.4 per cent contraction in the preceding quarter.
The MTI had originally forecast a full-year GDP growth of between 4 and 6 per cent this year, in contrast to last year’s contraction of 5.4 per cent.
However, while it maintains this prediction, MTI added that it is keeping an eye on global and local developments in light of the pandemic.
MTI wrote, “While it is possible that the Singapore economy will outperform the “4.0 to 6.0 per cent” growth forecast for 2021, there are also significant downside risks. The most important is the trajectory of the Covid-19 pandemic. Countries are experiencing recurring waves of infections, with the emergence of more transmissible strains of the virus, the easing of safe management restrictions, and delays in vaccinating populations. These resurgences, as well as the countries’ public health responses to them, will inevitably affect their economic growth.”
The ministry highlighted present risks and uncertainties, even as Singapore’s Covid-19 situation “is generally well under control” and “we are making good progress vaccinating the entire population.”
However, recently imposed restrictions, while not as stringent as last year’s circuit breaker, have meant people staying home and retail shops remaining shut.
The head of treasury research and strategy at OCBC Bank, Ms Selena Ling, has called it “a setback”, although she admitted that many have got used to work from home and online shopping.
The article also quotes an economist at CIMB Private Banking, Mr Song Seng Wun, as saying that consumer-facing businesses, including food and drinks and services sectors, would feel the blow from the restrictions more.
And while a complete lockdown has not been called, the possibility of it also affects consumer and business confidence.
But it seems that the ministry remains optimistic for overall economic recovery.
“Domestically, the performance of the Singapore economy in the first quarter of 2021 was stronger than expected. While the recent tightening of domestic restrictions and border controls represents a setback to segments of the economy, the broader economy should still see a recovery this year in tandem with the global economic rebound and further progress in the domestic vaccination programme,” wrote MTI.
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