Singapore's Q3 GDP performing better than MTI estimates: analyst

Strong uptick in manufacturing momentum in Q3 helped improve GDP.

Singapore's economy is doing better compared to advance estimates of the Ministry of Trade Industry (MTI), according to economist Barnabas Gan of UOB.

In his report, he placed Singapore Q3 GDP contraction at 5.8% YoY slower than the 7% YoY contraction predicted by MTI in its report published in October.

“Singapore’s economy contracted 6.5% in the first three quarters of 2020, up from the previous -6.9% print based on MTI’s advanced estimates. Still, Singapore’s Q3 GDP
fared lower compared to market estimates at -5.5%, albeit closer to UOB’s estimates at -5.6% YoY,” Gan said.

Gan credited the strong uptick in manufacturing momentum in Q3 as the driving force of the improved GDP data.

“Do note that the strong performance in the biomedical manufacturing cluster (+89.8% YoY) was supported by the demand for pharmaceutical-related products. Delving into the sub-components, the surge in the biomedical manufacturing cluster was on the back of strong pharmaceutical production (+113.6% YoY). Elsewhere, semiconductor-related clusters such as Precision Engineering (+10.0% YoY) and Electronics (+7.0% YoY) expanded in September as well,” he added.

Gan said the decline is mostly led by the aviation and tourism-related sectors such as air transport and accommodation. The transportation & storage sector plunged 29.6% YoY in Q3, extending the decline of -39.2% YoY in Q2, as the air and water transport segments declined on sluggish air travel demands and fall in sea cargo volume handled.

The accommodation & food services sector sank 24% YoY in the same period, albeit improving from the -41.8% YoY print in Q2. Within the sector, poor international visitor arrivals and fall in sales volume across all sub-segments within the food services industry dragged the overall sector.

“Despite seeing three consecutive quarters of YoY contraction, the latest GDP print suggests that Singapore’s economy will probably see better days ahead in 2021,” Gan emphasized.

He adds that the official GDP projection in 2020 has been narrowed to a range of between -6% and -6.5%, from a previous range of between -5% and -7%.

Gan agreed with the MTI prediction of the economy expanding between 4.0% and 6% in 2021.

“This is in line with the latest MAS Survey of Professional Forecasters (Sept 2020) where Singapore is expected to contract by 6% in 2020, and expand 5.5% in 2021,” he added.

Gan also highlighted three drivers that would likely propel Singapore’s economy into 2021.

“First, it includes the signing of the RCEP which Singapore as a trade-reliant economy, will likely benefit immensely from. Second, it is hoped that US president-elect Joe Biden may take on a more constructive and multilateral approach in trade with other countries. Third, Singapore’s position in producing and supplying biomedical products and supplies especially during this COVID-19 pandemic will continue to lift overall manufacturing activities into 2021,” Gan said.