Singapore revises Q1 GDP growth up to 1.3% on export demand

SINGAPORE — Singapore revised up gross domestic product growth for the January-March quarter to 1.3% from a preliminary result of 0.2%, on the back of strong export demand.

The government on Tuesday also maintained its economic growth outlook for this year, at 4% to 6%, even as rising COVID-19 cases at home and abroad hit business activity.

In the data, compared with that of a year earlier, the manufacturing sector grew 10.7% from a year earlier. The country’s benchmark non-oil domestic exports increased 9.7%.

Driven by a steady recovery in the manufacturing sector, the return to positive territory in the first quarter raised hopes for a strong rebound from last year’s 5.4% contraction — the city-state’s worst performance since independence in 1965.

Commenting on the economic outlook, the Ministry of Trade and Industry said in Tuesday’s statement that “the broader economy should still see a recovery this year in tandem with the global economic rebound and further progress in the domestic vaccination program,” noting that trade-related sectors will be benefit from the pickup in external demand.

“In particular, the manufacturing sector is expected to expand more strongly than earlier projected due to robust semiconductor demand from the 5G and automotive markets,” the ministry said.

But surging infections across Asia — coupled with a modest yet worrying rise in domestic cases and tight new restrictions — have complicated the picture.

One affected sector is construction, which accounts for about 3% of Singapore’s total GDP and has been reeling since last year. The industry relies heavily on migrant workers from South Asian countries, but due to the explosive outbreak in India, Singapore last month froze entries by short-term travelers and long-term pass holders from India. The restrictions have since been extended to arrivals from Bangladesh and other South Asian nations.

“The manpower crunch, along with the requirement to comply with safe management measures, will significantly impede the recovery” of the sector, the ministry said.

In addition, since late April, local infections have risen due to clusters that emerged at Changi Airport as well as a general hospital. This led to tougher rules in mid-May, requiring restaurants to offer only takeout and deliveries. Citizens have been urged to minimize unnecessary outings, hurting retailers.

During the week through Sunday, the city-state reported 183 new non-imported coronavirus cases. This is still a far cry from the huge numbers seen in India, or even the thousands of daily cases in Japan. Nevertheless, it is well above the 13 cases Singapore recorded in the fourth week of April.

A quarantine-free travel bubble with Hong Kong, which was scheduled to start on Wednesday, has been deferred. And two major international events Singapore was due to host — the Shangri-La security dialogue in June and the World Economic Forum’s special annual meeting in August — have been canceled. All three would have helped the ailing tourism sector.

Even so, the economic impact from the ongoing restrictions appears likely to be less severe than last year, thanks to steady export demand as well as the promising vaccine drive.

About 1.4 million people, or a quarter of the total population, had been fully vaccinated as of May 17, according to the Health Ministry. The plan is to vaccinate all eligible residents by the end of this year with the Pfizer-BioNTech and Moderna vaccines.

Singapore also adjusted its vaccination strategy last week, extending the interval between the two doses to six to eight weeks, rather than three to four. This way, more people can get the first jab faster, providing limited protection.

“The outlook for Singapore’s overall economy and especially the jobs market may worsen in the second quarter, but we do not expect to see a downturn of the same magnitude as last year,” Moody’s Analytics wrote in a recent note.

“Recent non-oil domestic export figures showed strong growth and are expected to remain resilient because of buoyant global demand for semiconductors, advanced manufacturing equipment, and pharmaceutical components.”