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SINGAPORE: Singapore’s economy contracted at a slower pace of 7 percent in the third quarter compared to the same period last year, following the gradual reopening of the economy after the COVID-19 “breaker” period.
This compares with an estimated 7.6 percent contraction by private sector economists surveyed by the Monetary Authority of Singapore (MAS) last month.
This is also an improvement from the 13.3 percent contraction in the second quarter, early estimates from the Ministry of Commerce and Industry (MTI) showed on Wednesday (Oct. 14).
On a seasonally adjusted quarter-on-quarter basis, Singapore’s economy expanded 7.9% in the third quarter, recovering from the 13.2% contraction in the previous quarter.
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MANUFACTURING EXPANDS, CONSTRUCTION SLIDES
The manufacturing sector grew 2 percent year-on-year in the third quarter, reversing the 0.8 percent contraction in the previous quarter.
MTI said the growth was supported by production expansions in the electronics and precision engineering groups, which in turn were driven by “strong global demand” for semiconductor and semiconductor manufacturing equipment.
On a seasonally adjusted quarter-on-quarter basis, the manufacturing sector expanded 3.9 percent, a turnaround from the 9.1 percent contraction in the second quarter.
The construction sector contracted at a slower pace of 44.7% year-on-year in the third quarter, after a 59.9% drop in the previous quarter.
Meanwhile, construction production in the third quarter remained weak due to the slow resumption of construction activities due to the need for construction companies to implement safe COVID-19 management measures.
On a seasonally adjusted quarter-on-quarter basis, the construction sector grew 38.7 percent, recovering from the sharp contraction of 59.4 percent in the second quarter, when most construction activities had to stop due to COVID- 19. circuit breaker period and movement restrictions in foreign worker dormitories.
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COVID-19 RESTRICTIONS CONTINUE TO AFFECT SERVICE INDUSTRIES
Within services, sectors related to aviation and tourism, such as air transport and accommodation, continued to experience significant contractions, as global travel restrictions and low demand for travel almost completely paralyzed air travel and visitor arrivals.
Service industries contracted 8% year-on-year in the third quarter, amplifying the 13.6% drop in the previous quarter.
On a seasonally adjusted quarter-on-quarter basis, service industries expanded 6.8 percent, a reversal of the 11.2 percent decline seen in the second quarter.
Other trade-related service sectors, such as wholesale trade, were also affected by weak external demand, the MTI said.
Although consumer-oriented sectors such as retail and foodservice saw an improvement in performance as the economy exited the circuit breaker, they remained in contraction, with sales volumes below year-earlier levels due to weak consumer confidence and resulting capacity constraints from security. distancing measures.
The finance and insurance sectors, as well as information and communications, registered sustained growth during the quarter.
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PASSED ECONOMIC REOPENING
MTI said the better performance of Singapore’s economy in the third quarter came as a result of the gradual reopening of the economy after the “circuit breaker” that was implemented between April 7 and June 1.
The ministry used non-annualized quarterly seasonally adjusted growth rates instead of annualized quarterly seasonally adjusted growth rates to inform its third-quarter estimates, and said it will continue to do so in the future.
It switched to non-annualized rates because annualized rates “are prone to misinterpretation if quoted without context,” the MTI said in an explanatory note on its website.
“In particular, the public may end up misinterpreting the performance of the economy when there are large changes in real GDP from the previous quarter that are unlikely to continue for the next three quarters,” he said, adding that the -43.3 per annualized percent The seasonally adjusted quarter-on-quarter growth rate in the second quarter had “exaggerated” the contraction of the economy.
Singapore entered a technical recession in the second quarter of this year after recording two consecutive quarter-on-quarter contractions.
Official forecasts estimate that the economy may contract between 5% and 7% throughout 2020.
Singapore’s overall unemployment rate rose to 3.4 percent in August, surpassing the peak of 3.3 percent recorded in September 2009 during the global financial crisis.
On Wednesday, Singapore’s central bank remained firm on its monetary policy, saying that “an accommodative stance will remain appropriate for some time.”
MAS also said that while third-quarter GDP has recovered after a sharp contraction in the previous quarter, the momentum of GDP growth is likely to be “modest” in a slow external environment, a persistent weakness in some services. internal and limited recovery in travel. -related sector.
“However, unless the course of the COVID-19 pandemic worsens again, Singapore’s economy is expected to expand in 2021, following this year’s recession,” he said.
Advance GDP estimates are largely calculated from data for the first two months of the quarter, in this case July and August. This is the first full quarter after Singapore exited the COVID-19 breaker period.
After the Phase 1 reopening that lasted 18 days, the country has been in Phase 2 since June 19, with retail stores allowed to reopen and restaurants resuming dining while a safe distancing is observed.
The multi-ministerial COVID-19 working group is working on a roadmap towards Phase 3 of reopening economic activities and will give more details in the coming weeks, Health Minister Gan Kim Yong said in Parliament on 5 October.
He also said that Singapore will remain in the orange status of the disease outbreak response system (DORSCON) “for the time being.”
“Even as we move into Phase 3, the new normal will be different than what we were used to in the days before COVID,” Gan said at the time.
“At this time, in particular, we have to be very aware that while the number of cases in Singapore is low, the cases around us in other parts of the world continue to increase. Therefore, we cannot lower our guard. “
The government has set aside about S $ 100 billion to fight the COVID-19 pandemic, presenting four budgets from February to May and an additional round of gradual support in August.
All these measures have “substantially cushioned” the economic damage, Deputy Prime Minister Heng Swee Keat said in parliament last week.
Heng announced new measures and extensions to various support initiatives on October 5, and these will be discussed when Parliament meets on Wednesday.
MTI said it will publish preliminary estimates of GDP for the third quarter, including performance by sectors, sources of growth, inflation, employment and productivity, in its Singapore Economic Survey in November.
