SINGAPORE - Singapore's economy expanded at a slower pace in the first quarter of 2022, falling slightly short of analysts' estimates. While continued growth is expected in the coming quarters, economists sounded caution over the downside risks, given the war in Ukraine, surging inflation and supply chain disruptions.

Gross domestic product (GDP) grew 3.4 per cent year on year, moderating from the 6.1 per cent expansion seen in the fourth quarter of 2021, according to advance estimates released by the Ministry of Trade and Industry (MTI) on Thursday (April 14).

This was lower than the 3.8 per cent year-on-year growth forecast by economists in a Bloomberg poll.

On a quarter-on-quarter seasonally adjusted basis, the economy expanded 0.4 per cent, slower than the 2.3 per cent growth seen in the previous quarter.

Most sectors saw slower growth in the first quarter on a year-on-year basis.

This was expected given the stronger statistical base in the same quarter a year ago, noted Mr Yu Liuqing, country analyst for Asia at the Economist Intelligence Unit. 

Ms Selena Ling, OCBC Bank's chief economist and head of treasury research and strategy, said that Singapore’s growth prognosis is likely to improve in the coming quarters given the lifting of border controls and relaxation of Covid-19 restrictions, which would be a plus for the services sector. 

“The trade-related and modern services sectors should see more modest growth ahead, but domestic consumption and public infrastructure investments should drive growth in 2022,” she said.

Oxford Economics’ Ms Priyanka Kishore and Ms Sung-Eun Jung said that while they expect a rebound in the services sector in the second quarter, factors such as slowing global growth, supply chain disruptions and weaker expansion prospects for China will weigh on growth momentum. 

“We expect growth to slow sequentially again in Q2,” they said, adding that the risks to growth have shifted more to the downside amid heightened geopolitical uncertainties, rising inflation and downside risks to China due to its continued zero-Covid-19 approach.

Growth of the key manufacturing sector normalised to 6 per cent year on year, compared with the 15.5 per cent seen in the fourth quarter of last year.

The electronics and precision engineering clusters continued to record strong output growth, driven by sustained global demand for semiconductors and semiconductor equipment.

On a quarter-on-quarter seasonally adjusted basis, the manufacturing sector contracted by 1.2 per cent in the first quarter, a reversal from the 6.3 per cent growth in the previous quarter.

The construction sector grew 1.8 per cent year on year in the first quarter, slower than the 2.9 per cent posted in the previous quarter.

In absolute terms, the value-added of the sector remained 25.3 per cent below its pre-pandemic level, with activity at construction worksites remaining weighed down by labour shortages.

Among the services sectors, the group of sectors comprising the wholesale and retail trade, and transport and storage segments posted a 3.2 per cent increase year on year, extending the growth seen the preceding quarter.

For the whole of 2021, Singapore's economy grew 7.6 per cent, rebounding from the 4.1 per cent contraction seen in the previous year.

Ahead of Russia's invasion of Ukraine on Feb 24, MTI had projected GDP growth of 3 per cent to 5 per cent for the whole of 2022.

Maybank Securities Singapore analysts Chua Hak Bin and Lee Ju Ye said they expect MTI to downgrade its GDP growth forecast to 2 per cent to 4 per cent in May, when the final GDP estimate for the first quarter is released.

This is given that the growth outlook has been clouded by higher energy prices, manufacturing supply chain disruptions, a weaker European Union economy and lockdowns in China, they said. 

Rising price pressures have been a key concern so far in 2022, with global commodity price shocks and supply chain disruptions adding to domestic cost pressures. 

To safeguard against the inflation threat, the Monetary Authority of Singapore further tightened monetary policy in its biannual review on Thursday, building on policy moves made last October and in January this year. 

This tighter stance will slow the inflation momentum and help ensure medium-term price stability, the central bank said.