A masked man walking along Marina Bay Sands, Singapore’s central business district, seen in the background on April 1, 2020.
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SINGAPORE – Singapore’s economy grew for the first time since the Covid-19 eruption.
The Southeast Asian economy expanded 0.2% in the first quarter of 2021 from a year ago, according to official estimates released on Wednesday. This is the first economic growth in the country since the fourth quarter of 2019.
Analysts polled by Reuters expected Singapore’s economy to shrink by 0.2% in the first quarter of a year ago.
Seasonally, quarterly, the economy expanded by 2%, the Singapore Ministry of Commerce and Industry said in a statement.
The following explains the performance of the different industries during the first three months of 2021:
- Commodity-producing industries grew by 3.3% over a year ago, helped by a 7.5% expansion in manufacturing production.
- But construction continued to contract, albeit at a slower pace of 20.2% compared to 27.4% in the previous quarter.
- Meanwhile, service-producing industries fell 1.2% year-on-year.
Alex Holmes, an Asian economist at consulting firm Capital Economics, said Singapore’s economy should continue to recover in the coming quarters.
“The export sector will remain strong, thanks to strong global demand for semiconductors, advanced manufacturing equipment and pharmaceutical components,” he said in a note after the latest data release.
Holmes claimed that the main headwind against Singapore’s economy is the strict travel restriction. He said the reopening of the border is likely to be a gradual process, so the persistence of weakness in the aviation and retail and hospitality sectors will slow the recovery.
Singapore reported the worst economic recession in history last year, when it contracted by 5.4% as global blockade measures to curb the spread of Covid-19 caused a drop in activity .
The central bank maintains the policy
In a separate statement, the Monetary Authority of Singapore, the country’s central bank, said it would keep its policy unchanged.
The MAS manages monetary policy by setting the exchange rate, rather than interest rates, by allowing the Singapore dollar to rise or fall within an undisclosed range against a basket of currencies. Adjust the band through three levers: the slope, the midpoint and the width.
On Wednesday, the central bank said it was maintaining its political side (known as the nominal effective exchange rate of the Singapore dollar) at an annual appreciation rate of 0%. The width and midpoint of the band remained unchanged, he said.
Explaining its political stance, the MAS said that while Singapore’s economy will continue to grow, the sectors most affected by the Covid crisis will continue to struggle.
He added that core inflation is expected to rise “only gradually” between 0% and 1% this year. Core inflation eliminates accommodation and private transportation, and is the MAS’s preferred price indicator.
The central bank said Singapore’s economic growth for 2021 is likely to exceed the upper end of the official forecast range of 4% to 6%, with the restriction of a setback in the global economy.