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Apollonian attitudes enable smoother sailing

■ Singapore’s revised GDP expanded by 7.1% yoy and 1.3% qoq SA in 3Q21, causing the MTI to narrow its 2021F GDP forecast to “around 7.0%”.
■ Singapore’s recovery this year remains uneven as manufacturing and hi-tech sectors continue to outperform tourism and travel oriented ones.
■ Barring several potential risks to the economy, the city state appears to have sailed through most of the storm and is poised for a strong finish in 2021F.

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Singapore’s GDP above pre-pandemic levels

Singapore’s revised GDP expanded by 7.1% yoy in 3Q21 (vs. 15.2% in 2Q21), an upward revision from the 6.5% yoy seen in the advance announcement, beating our and consensus estimates. Singapore’s GDP grew 1.3% qoq seasonally-adjusted (SA) in 3Q21, rebounding from the 1.4% qoq SA fall in 2Q21. Domestic demand (+3.5% qoq SA in 3Q21 vs. -1.4% qoq SA in 2Q21) took over as the qoq SA growth driver in 3Q21, from net exports (-5.1% qoq SA in 3Q21 vs. +1.7% qoq SA in 2Q21). Despite the reversal in net exports, we see the sequential lift in domestic demand as a big positive for the economy as it demonstrates a rebound in consumer and business sentiment (private consumption: +2.4% qoq SA in 3Q21 vs. -3.3% qoq SA in 2Q21; total investment: +6.3% qoq SA in 3Q21 vs. -0.9% qoq SA in 2Q21). The growth seen in 3Q21 has put Singapore’s quarterly GDP back above pre-pandemic 3Q19 levels (by 0.8%). Singapore’s current 9M21 GDP growth sits at 7.7% yoy, & the Ministry of Trade and Industry (MTI) narrowed its 2021F GDP growth forecast from 6-7% to “around 7.0%”.

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An uneven recovery means you win some, you lose some

Singapore’s recovery this year remains uneven, as some sectors were more greatly affected the pandemic. Manufacturing (+7.2% yoy) has demonstrated its pandemic resistance by displaying its 5th consecutive quarter of yoy growth. We expect this sector to remain strong as semiconductors and its equipment have consistently ranked among the top contributors to NODX growth. Higher tech sectors such as finance & insurance (+9.0% yoy) and information & communications (10.4% yoy) continued to perform in 3Q21, with growth in the former supported mainly by an expansion in the insurance segment as entities look to hedge against the risks brought on by the pandemic, whilst the latter benefitted from firms digitalising and seeking enterprise IT solutions to adapt to new ways of working. More tourist oriented sectors such as accommodation (-4.1% yoy) and F&B services (-4.2% yoy) continued to suffer as a result of the lack of tourists; however, the ongoing Vaccinated Travel Lanes with 13 countries (soon to be 21) should help slow the decline. Even though retail trade managed to eke out a 0.7% yoy expansion, and transportation & storage grew by 8.2% yoy, these pale in comparison to the 8.6% and 29.0% declines seen in 3Q20; however, we should see improvements as Singapore continues its border reopening.

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Smooth sailing vaccination drive but potential risks ahead

With the city-state having fully vaccinated 94% of its eligible population, giving booster shots to 24% of the total population, and containing the current overall ICU utilisation rate at 55.2%, the economy is poised for a strong finish for the remainder of the year. Nevertheless, the MTI cites four main risks that may arise from the global economy: 1) despite high vaccination rates in many of Singapore’s top trading partners, concerns over the waning efficacy and the potential for more virulent mutations of the virus remain a risk; 2) despite global supply disruptions being viewed as transitory, a more protracted than
expected disruption could unsettle Singapore’s industrial production; 3) rising energy and commodity prices could force the hands of central banks to increase interest rates prematurely and/or larger than anticipated, thereby tightening global financial conditions; and 4) geopolitical tensions among the world’s major economies could negatively affect global economic recovery and hurt trade, which is particularly important for Singapore as total trade in 3Q21 accounted for 328.9% of GDP. All in, we reiterate our GDP growth forecast for 2021F of 6.6% vs. MTI’s “around 7%”, and reiterate our 2022F GDP growth forecast of 4.3% vs. MTI’s 3-5% which it announced today.

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