January 3, 2022
SINGAPORE – Singapore’s economy wrapped up 2021 with its fastest growth in more than a decade, putting behind the Republic’s worst recession the year before when the Covid-19 pandemic struck.
The economy grew 7.2 per cent last year, the most since 2010 and higher than earlier estimates, the Ministry of Trade and Industry (MTI) said on Monday (Jan 3).
MTI in November last year had predicted that gross domestic product (GDP) growth in 2021 would come in at about 7 per cent, the top end of an earlier forecast range of 6 per cent to 7 per cent. The economy had contracted by 5.4 per cent in 2020.
In his New Year address last Friday, Prime Minister Lee Hsien Loong said that the Singapore economy is expected to grow by 3 per cent to 5 per cent in 2022 – reiterating MTI’s maiden forecast for the year in November.
For the fourth quarter of 2021, the economy expanded 5.9 per cent year on year, moderating from the 7.1 per cent growth in the previous quarter, which was fuelled by a low base comparison.
Economists in a Bloomberg poll had forecast fourth-quarter GDP growth at 5.1 per cent year on year and full-year 2021 expansion at 7.1 per cent.
On a quarter-on-quarter seasonally adjusted basis, the economy expanded 2.6 per cent in the October to December quarter, faster than the 1.2 per cent growth in the preceding quarter, MTI said.
Analysts said the quarterly gain shows that economic growth picked up momentum despite the global Omicron variant surge that led Singapore to suspend ticket sales on vaccinated travel lanes (VTLs) till Jan 20.
Ms Selena Ling, chief economist and head of treasury research and strategy at OCBC Bank, said the Republic’s 2022 growth outlook will depend on further relaxation of social distancing rules and additional VTLs adding more life to the services sector and helping ease some of the labour shortages that have marred the construction sector.
She said MTIs 2022 growth forecast reflects less stellar manufacturing growth and the services and construction sectors taking up some of the slack.
Mr Barnabas Gan, economist at UOB Group, said the recovery of Singapore’s aviation and tourism-related sectors is expected to continue, although MTI had said previously that activity is expected to remain below pre-Covid levels throughout 2022.
“Last but not least, the gradual relaxation of Singapore’s domestic restrictions should translate into a sustainable supply of manpower and support labour-intensive industries such as the construction sector,” he noted.
Manufacturing was still the best performing sector in the final quarter of 2021, with output swelling by 14 per cent year on year, almost double the 7.9 per cent growth in the third quarter.
The sector grew 12.8 per cent through the whole of 2021, up from 7.3 per cent the year before.
MTI said manufacturing growth during the quarter was supported by output expansions in all clusters. In particular, the electronics and precision engineering clusters continued to record strong output growth, driven by sustained global demand for semiconductors and semiconductor equipment respectively.
The construction sector grew by 2 per cent on a year-on-year basis in the fourth quarter of 2021, slower than the 66.3 per cent growth in the preceding quarter.
In absolute terms, the value-added of the sector remained 26 per cent below its pre-Covid-19 level – during the fourth quarter of 2019 – as activity at construction worksites continued to be weighed down by labour shortages due to border restrictions on the entry of migrant workers, MTI said.
The sector still managed full-year growth of 18.7 per cent – a sharp rebound from the 35.9 per cent contraction in 2020.
The services industries expanded by 4.6 per cent in the fourth quarter and 5.2 per cent through last year. The sector shrank by 4.7 per cent in the corresponding fourth quarter of 2020 when full-year growth contracted by 6.9 per cent.
The expansion in services was led by the information and communications, finance and insurance, and professional services sectors that collectively expanded by 6 per cent year on year in the fourth quarter of 2021, moderating from the 8 per cent growth in the previous quarter.
The full-year 2021 growth for these industries came in at 6.8 per cent.
Analysts said interest-rate hikes worldwide, in response to rising inflation, tops the list of downside risks for this year’s growth outlook.
ECONOMIC GROWTH BY SECTOR
*Advance estimates.
Table: STRAITS TIMES GRAPHICS Source: MINISTRY OF TRADE AND INDUSTRY
Singapore’s overall inflation edged up to 3.8 per cent in November, from October’s more than eight-year high of 3.2 per cent. Core inflation, which excludes rents and private road transport costs, climbed to 1.6 per cent from 1.5 per cent in October.
Other risks that could derail hopes for a smoother growth trajectory include a further slowdown in China – Singapore’s largest trading partner – and new waves of Covid-19 mutations.
On the flip side, higher vaccination rates and an easing in severity of new Covid variants could imply a faster re-opening of regional borders and aid economies across Asia.
Singapore has one of the world’s highest vaccination rates, with 87 per cent of its total population fully inoculated and booster shots administered to about 40 per cent.
In his message, PM Lee said the country can be “quietly confident” that it can cope with the impact of the omicron variant even though it’s not completely out of the woods yet. Singapore’s position now is “greatly strengthened” compared to two years ago amid a ramped up vaccination drive that now includes young children, he said.
While the pace of relaxation of mobility curbs may have slowed down, Singapore is still on track with its strategy to treat Covid-19 as endemic.
After suffering daily cases in the thousands a few months back amid the Delta variant wave, daily infections have dropped to the hundreds in the past week. Hospitalisation rate and intensive care admissions have also dipped.
Dr Chua Hak Bin, regional co-head of macro research at Maybank Kim Eng in Singapore, said; “We expect the economic reopening to continue in the first quarter of 2022 as hospitalisations decline and more people receive booster shots.”
MTI said it will release the preliminary GDP estimates for the fourth quarter and whole of 2021, including performance by sectors, sources of growth, inflation, employment and productivity, in its Economic Survey report due in February.