S'pore economy grows at slower pace of 6.5% in Q3

Moderation expected due to heightened alert curbs, high base set last year: Analysts

Singapore's economy expanded at a slower annual pace in the third quarter, the Ministry of Trade and Industry (MTI) said yesterday.

Gross domestic product rose 6.5 per cent on a year-on-year basis in the July to September period, moderating from 15.2 per cent growth in the previous quarter, MTI said in its advance estimate report.

The pace of growth was weaker than the 7 per cent forecast by economists in a Monetary Aut-hority of Singapore (MAS) survey last month, and a Bloomberg poll that had predicted a 6.6 per cent expansion.

Analysts said the moderation in growth had been expected, given the return to phase two (heightened alert) and tightened Covid-19 curbs between July and August, and due to a high base set in the corresponding period last year.

However, on a quarter-on-quarter seasonally adjusted basis, MTI data showed that the economy expanded by 0.8 per cent in the third quarter of this year, improving upon the 1.4 per cent contraction in the preceding quarter.

The quarterly gain was seen by analysts as a sign that sequentially, the economy is on track for a relatively strong recovery.

Meanwhile, the central bank also tightened its monetary policy yesterday, saying it expects rising inflation and aims to ensure price stability. The Singapore dollar jumped about 0.3 per cent after the announcement to hit a three-week high of 1.3475 per US dollar.

In its tightening move, MAS slightly raised the slope of its Singapore dollar nominal effective exchange rate policy band, up from zero per cent previously. This means that the currency is likely to strengthen.

Ms Selena Ling, head of treasury research and strategy at OCBC Bank, said that on an annual basis, growth in the first half of this year stands at 7.7 per cent, but will likely slow to around 5.8 per cent in the second half as growth in the period will be compared with a much faster pace of recovery last year.

This should still bring full-year 2021 growth to within the MTI forecast range of 6 per cent to 7 per cent, said Ms Ling.

Plans for a gradual reopening of borders and easing of Covid-19 curbs have raised hopes of a faster recovery for Singapore this year.

But analysts have also warned that the path to higher growth may still face challenges amid supply chain disruptions caused by delays in shipping schedules due to port congestion and a shortage of containers, as well as rocketing freight costs.

The supply disruptions have further worsened in recent weeks due to ongoing power shortages in China and stiffer movement restrictions due to a Delta-variant resurgence across the Asean region.

MTI said the manufacturing sector in the third quarter grew by 7.5 per cent on a year-on-year basis, extending the 18 per cent growth in the previous quarter.

Manufacturing growth was supported by output expansions in all clusters, except for chemicals.

The electronics and precision engineering segments continued to post strong growth, driven by global demand for semiconductors and semiconductor equipment.

Construction expanded by 57.9 per cent on a year-on-year basis in the third quarter of this year, following a 117.5 per cent growth in the preceding quarter.

MTI said the construction sector's growth was largely due to low base effects given the slow resumption of construction activities after the circuit breaker period last year.

A version of this article appeared in the print edition of The Straits Times on October 15, 2021, with the headline 'S'pore economy grows at slower pace of 6.5% in Q3'. Subscribe