SINGAPORE'S third-quarter economic growth staged a rebound from the deep contraction seen during its "circuit-breaker" period but has continued to stay in negative territory, according to advance estimates released by the Ministry of Trade and Industry (MTI) on Wednesday.
Gross domestic product (GDP) grew by 7.9 per cent in Q3, on a quarter-on-quarter seasonally-adjusted basis, a stark reversal of the 13.2 per cent contraction clocked in Q2, when Singapore was on a partial economic shutdown due to the Covid-19 pandemic.
On a year-on-year basis, however, the economy shrank by 7 per cent in Q3, although this is an improvement from the 13.3 per cent contraction observed in Q2. This is however a notch weaker than the 6.8 per cent contraction predicted by private sector economists, according to a Bloomberg poll.
"The improved performance of the Singapore economy in the third quarter came on the back of the phased reopening of the economy following the 'circuit breaker'," MTI said in a statement.
Q3's better performance came largely from the manufacturing sector, which expanded by 2 per cent year on year, undoing the 0.8 per cent contraction seen in Q2. Quarter on quarter, the manufacturing sector grew by 3.9 per cent on a seasonally-adjusted basis, bouncing back from Q2's 9.1 per cent contraction.
The manufacturing sector's gains came mostly from output expansions in the electronics and precision engineering clusters, which were in turn driven by robust global demand for semiconductors and semiconductor manufacturing equipment, MTI said.
"Manufacturing and trade have been remarkably resilient in this pandemic recession," Maybank Kim Eng economists said, adding that the final Q3 growth figures may be upgraded "as global demand for electronics appears to be firming".
Meanwhile, the construction sector shrank by 44.7 per cent on a year-on-year basis in Q3, extending the previous quarter's 59.9 per cent decline. However, on a quarter-on-quarter seasonally-adjusted basis, the construction sector grew by 38.7 per cent, a drastic turnaround from the sharp 59.4 per cent contraction in Q2.
The construction sector's weak year-on-year performance was attributed to the slow resumption of construction activities due to the need for construction firms to implement safe-management measures for a safe restart, MTI said.
The services-producing industries shrank by 8 per cent year on year in Q3, although this is an improvement of the 13.6 per cent decline in Q2.
Aviation and tourism-related sectors like air transport and accommodation continued to see significant contractions, as global travel restrictions and sluggish travel demand brought air travel and visitor arrivals to a near complete standstill, MTI said.
Although other trade-related services sectors such as wholesale trade were weighed down by weak external demand, consumer-facing sectors such as retail and food services saw an improvement in Q3 as Singapore gradually reopened its economy.
On a quarter-on-quarter seasonally-adjusted basis, the services sector grew by 6.8 per cent in Q3, up from the 11.2 per cent contraction in Q2.
OCBC's chief economist Selena Ling said although the retail and food services industries were improving, they have yet to return to pre-Covid-19 levels due to the weak labour market, which has diminished consumer sentiment, and capacity constraints stemming from safe-distancing measures in shops and restaurants.
"If the Singapore economy moves into Phase Three in Q4… this could mean further loosening of restriction or containment measures, which should bode well for the laggard construction and services sectors, even though the road ahead for the aviation and hospitality-related industries remain challenging due to most international borders being shut," Ms Ling said.
She is expecting Q4 GDP to contract by a milder 1.3 per cent year on year, with full-year GDP contraction coming in at 5.5 per cent.
Barclays regional economist Brian Tan is expecting a full-year GDP contraction of 6 per cent given that the economy shrank by 6.9 per cent year on year in the first three quarters of 2020.
Maybank economists are also predicting a 6 per cent full-year GDP contraction, adding that recovery will likely be a "slow grind" until a vaccine is widely available and border controls are relaxed more significantly.