Singapore’s economy unexpectedly grows in the first quarter of 2021

SINGAPORE — Singapore’s economy grew for the first time since the outbreak of Covid-19.

The Southeast Asian economy expanded by 0.2% in the first quarter of 2021 from a year ago, official advance estimates showed on Wednesday. That’s the country’s first economic growth since the fourth quarter of 2019.

Analysts polled by Reuters had expected the Singapore economy to shrink 0.2% in the first quarter from a year ago.

On a quarter-on-quarter seasonally adjusted basis, the economy expanded by 2%, Singapore’s Ministry for Trade and Industry said in a statement.

Here’s how the different industries performed in the first three months of 2021:

• Goods-producing industries grew 3.3% from a year ago, helped by a 7.5% expansion in manufacturing output.
• But construction continued to contract, though at a slower pace of 20.2% compared with 27.4% in the previous quarter.
• Meanwhile, services-producing industries contracted by 1.2% on a year-on-year basis.

Alex Holmes, Asia economist at consultancy Capital Economics, said the Singapore economy should continue to recover in the coming quarters.

“The export sector is set to remain strong, on the back of buoyant global demand for semiconductors, advanced manufacturing equipment and pharmaceutical components,” he said in a note following the latest data release.

The main headwind the Singapore economy faces is strict travel restrictions, said Holmes. He said reopening of the border will likely be a gradual process, so persistent weakness in the aviation as well as retail and hospitality sectors will hold back the recovery.

Singapore reported its worst ever economic recession last year when it contracted 5.4% as lockdown measures globally to slow the spread of Covid-19 caused a plunge in activity.

In a separate release, the Monetary Authority of Singapore — the country’s central bank — said it kept its policy unchanged.

The MAS manages monetary policy through setting the exchange rate, rather than interest rates, by allowing the Singapore dollar to rise or fall within an undisclosed band against a basket of currencies. It adjusts the band through three levers: the slope, the mid-point and the width.

On Wednesday, the central bank said it kept its policy band — known as the Singapore dollar nominal effective exchange rate — at a 0% rate of appreciation per annum. The width and mid-point of the band remained unchanged, it said.

Explaining its policy stance, the MAS said even though the Singapore economy will continue to grow, the sectors worst hit by the Covid crisis will continue to struggle.

It added that core inflation is forecast to rise “only gradually” by 0% to 1% this year. Core inflation strips out accommodation and private transport, and is the preferred price gauge of the MAS.

The central bank said Singapore’s economic growth for 2021 will likely exceed the upper end of the official 4% to 6% forecast range, barring a setback to the global economy.