F&B and consumer-facing sectors get boost as Covid-19 curbs eased; manufacturing sees slowdown

SINGAPORE - Domestic-oriented sectors finally got a boost in the first quarter of this year, buoyed by the gradual easing of Covid-19 restrictions, according to a review by the Monetary Authority of Singapore (MAS) released on Thursday (April 28).

But other segments, like manufacturing and modern services, lost some momentum and contracted instead. Modern services include financial and insurance firms, as well as those in information and communications technology. 

Domestic-oriented activities remained generally lacklustre in the last quarter of 2021, weighed down by renewed tightening of Covid-19 safe management measures, MAS said.

But as social restrictions were slowly eased from the end of last year, food and beverage sales expanded and grew further in 2022.

Sales of both restaurant and food catering services also rose strongly.

Meanwhile, the land transport sector grew in the first quarter of this year, as public transport ridership picked up, with half of the employees who were working from home starting to return to the office.

But retail sales contracted January to February this year, after an increase in the last three months of last year, on the back of weaker sales at supermarkets, provisions and sundry shops, as people dined out instead.

"In general, the retail sector has outperformed the other consumer-facing industries over the last two years, in part reflecting the shift in demand towards essential and durable goods and away from high-touch services during the pandemic," MAS noted.

The much-beleaguered construction sector also returned to growth in the first quarter of the year, after border restrictions on migrant workers were eased from late February, alongside some improvement in the supply of construction materials.

But the key manufacturing industry saw industrial production contract, contributing to most of the slowdown in gross domestic product in the first three months of the year.

Industrial production was mainly weighed down by the biomedical and transport engineering clusters, while electronics output surged, supported by strong global demand for semiconductors used in data centres and 5G products.

Growth in the modern services sector also slowed, led by a decline in the information and communications sector due to lower out-turns in games publishing activities.

Likewise, expansion in the finance and insurance sector moderated from its growth in the last quarter of 2021, dragged down by the fund management and insurance segments.

"The fund management segment fell sharply, as ongoing geopolitical tensions and the prospect of policy tightening across major economies weighed on global equities," MAS said.

"Meanwhile, the insurance segment contracted amid a decline in net premiums from general insurance, although this was partially offset by improved sales of single-premium life insurance products."

With border reopenings and easing of Covid-19 restrictions, travel activity registered a mixed performance in the first quarter of 2022.

Travel activity picked up with the launch of additional vaccinated travel lanes, while meetings, incentive travel, conferences and exhibitions also resumed on a larger scale.

The average number of monthly air passengers carried doubled in the first quarter of this year compared with the last quarter of 2021. Average monthly visitor arrivals also grew by 55.8 per cent in the first quarter.

But visitor arrivals were still only about 5 per cent of their pre-pandemic levels in 2019, MAS said.

The accommodation sector also contracted, due to a sharp fall in government bookings.

"With the majority of Covid-19 patients being placed on the Home Recovery programme since October last year, there has been a steady decline in demand for hotel quarantines," MAS said.

The hotel occupancy rate fell to 61 per cent in the first three months of 2022, down from the monthly average of 71 per cent in the last quarter of 2021, reflecting an increase in the supply of available rooms as the release of government bookings was not fully absorbed by a rise in demand from visitor arrivals and staycations, it added.

Overall, growth is projected to be between 3 per cent to 5 per cent this year, MAS said, in the absence of further disruptions caused by the war in Ukraine or a severe worsening of the pandemic.

The projected growth outcome is a moderation from the expansion in 2021, but would still be above trend for the second consecutive year, it added.

Domestic-oriented and travel-related clusters are expected to drive growth, as sectors that bore the brunt of the pandemic are forecast to stage a more decisive recovery.

On the other hand, the trade-related cluster, which led the recovery in 2021, could see its contribution shrink this year, while the contribution of modern services is expected to be stable.

"By the end of 2022, output levels in some segments of the economy are still expected to remain below pre-pandemic levels, although they would be significantly above their respective troughs," MAS said.

These include air transport and accommodation, as well as domestic land transport, construction and administrative and support services.