SINGAPORE - The Singapore economy grew at a record pace in the second quarter of 2021, due to the comparison with the same period last year when the Covid-19 pandemic plunged the economy into its worst recession.
Gross domestic product (GDP) expanded 14.3 per cent year on year in the April to June quarter, the Ministry of Trade and Industry (MTI) said on Wednesday (July 14).
The strong growth was largely due to the low base in the second quarter of last year, when GDP plunged by 13.3 per cent due to the circuit breaker measures implemented from April 7 to June 1, MTI said.
However, on a quarter-on-quarter seasonally-adjusted basis, the Singapore economy contracted by 2 per cent in the second quarter of this year, a reversal from the 3.1 per cent growth in the preceding quarter.
In absolute terms, GDP in the second quarter remained 0.9 per cent below its pre-pandemic level in the same period of 2019, MTI said.
The quarter-on-quarter dip in GDP was expected because of tightened Covid-19 restrictions during Singapore's phase two (heightened alert), which stretched from May 16 to June 13.
Despite the latest curbs, economists said Singapore's recovery remains on track, driven by manufacturing and exports, sectors more immune to Covid-19 curbs.
The flash figures for the second quarter, however, are lower than the forecasts of economists polled by Bloomberg, who predicted year-on-year growth of 14.8 per cent and a quarter-on-quarter decline of 1.8 per cent.
MTI has maintained its full-year 2021 growth forecast of 4 per cent to 6 per cent, made first in November last year. The full-year forecast will be reviewed again next month.
Thanks to an accelerated pace of vaccination, private-sector economists raised Singapore's 2021 growth forecast again to 6.5 per cent, in a poll released by the Monetary Authority of Singapore last month.
Ms Selena Ling, OCBC Bank's chief economist and head of treasury research and strategy, said the latest MTI data shows the GDP growth in the first six months of this year is likely to reach an annual pace of 7.4 per cent. Full-year growth may come close to 7 per cent - up from her earlier forecast of 6.3 per cent, she said.
"That 2021 growth is possible even if the second half growth momentum moderates on a year-on-year basis, as the 2020 base effects turn less accommodative," she said.
Ms Ling expects global and domestic economic recovery to pick up speed with a ramp up in vaccination rates, continued manufacturing resilience, a recovery in services and stabilisation in the construction sector.
The MTI data on Wednesday showed the key manufacturing sector expanded by 18.5 per cent year-on-year in the second quarter, extending the 11.3 per cent growth in the previous three-month period.
Growth was supported by all clusters except for biomedical manufacturing . The electronics and precision engineering clusters continued to expand due to robust global demand for semiconductor and semiconductor equipment.
Still, on a quarter-on-quarter seasonally-adjusted basis, the manufacturing sector contracted by 1.8 per cent, a pullback from the 11.4 per cent expansion in the first quarter.
Mr Prakash Sakpal, senior economist for Asia at ING Bank in Singapore, said manufacturing remains in the driving seat for annual GDP growth.
But the quarterly contraction was a setback to the sector's outlook and follows the lower-than-expected exports data for May.
Non-oil domestic exports rose 8.8 per cent in May, far below the 16 per cent growth forecast by analysts polled by Bloomberg.
"The gradual reopening of the economy should instil some more life into the domestic economy, but this negative spell is likely to linger for some time to come. That means the recovery will be mainly dependent on exports regaining their recent strength," Mr Sakpal said.
For construction, the MTI data showed the sector expanded by 98.8 per cent on a year-on-year basis, a turnaround from the 23.1 per cent contraction in the first quarter. The sharp upturn was due to low base effects as last year's circuit breaker measures had resulted in a stoppage of most construction activities in the second quarter of last year.
In absolute terms, the value-add of the sector remained 31.6 per cent below the level where it was before the pandemic in the second quarter of 2019.
On a quarter-on-quarter seasonally-adjusted basis, the construction sector shrank by 11 per cent in the second quarter of this year, a reversal from the 4.5 per cent growth in the previous quarter.
Across the service sectors - the wholesale and retail trade, and transportation and storage sectors grew by 9.3 per cent in the second quarter of this year, reversing the 1.7 per cent contraction in the previous quarter.
Meanwhile, the information and communications, finance and insurance and professional service sectors collectively expanded by 7.8 per cent, extending the 3.2 per cent growth in the first quarter.
The remaining group of service sectors - accommodation and food service, real estate, administrative and support service and other service sectors - expanded by 13.4 per cent, a turnaround from the previous quarter's 3.8 per cent contraction.
Most sectors within the group grew on the back of a low base in the second quarter of last year due to the circuit breaker.
On the whole, the value-added of this group of sectors remained 11.8 per cent below its level in the second quarter of 2019.
Commenting on the lower level of growth compared with the pre-Covid-19 period, Ms Ling said: "This is a reminder that despite the whippy annual and quarterly prints, there are still sectors within the Singapore economy that have not recovered to their pre-Covid-19 levels yet, although we are gradually getting there."
Some economists joined her in raising their full-year growth forecasts as they expect the momentum to gather pace from next month, when a majority of Singapore residents will be fully vaccinated.
UOB economist Barnabas Gan raised his growth forecast for this year to 6.5 per cent, from 5.5 per cent previously.
MayBank analyst Chua Hak Bin now sees 6.8 per cent growth, higher than his previous prediction of 6.2 per cent.
Mr Irvin Seah, senior economist at DBS Bank, said that he will stick to his 6.3 per cent projection for now. Mr Euben Paracuelles, economist at Nomura International, also decided to keep his full-year forecast unchanged at 7.5 per cent.
All these projections, however, suggest an upgrade of MTI's 4 per cent to 6 per cent growth forecast range is possible next month.