GDP deceleration implies heightened risks
? Singapore’s GDP growth decelerated to 3.7% yoy and 0.7% qoq SA in 1Q22
as a result of the Russia-Ukraine conflict and Omicron.
? In our view, manufacturing and tourism-reliant sectors are likely to fuel GDP
growth this year due to robust chip demand and rapid economic reopening.
? We reiterate our 4.2% GDP growth forecast for 2022F, but acknowledge that
risks are tilted to the downside.
1Q22 GDP growth revised upwards due to goods and services
Singapore’s GDP expanded by a revised 3.7% yoy in 1Q22 vs. +6.1% yoy in 4Q21,
outperforming our forecast but in line with Bloomberg consensus estimate. The upward
adjustment from 3.4% yoy growth in the advance estimate came as a result of upward
revisions in both goods and services industries. Goods producing industries’ growth has
been revised upward from 5.3% yoy to 6.3% yoy, whilst the services industries’ growth was
revised upward from 3.9% yoy in the advance estimate to 4.2% yoy. On a seasonally-adjusted (SA) basis, Singapore’s GDP growth decelerated significantly to 0.7% qoq SA in
1Q22 vs. +2.3% qoq SA in the previous quarter as a result of heightened geopolitical risks
and Omicron lockdowns at the beginning of the year. Overall, the Ministry of Trade and
Industry (MTI) maintained its official GDP growth forecast of 3.0-5.0% for 2022F, but
acknowledged that growth is more likely to come at the low er half of its forecast range.
Manufacturing to retain momentum throughout 2022F
Despite a considerable slow down in the IPI in Mar 2022, manufacturing growth for 1Q22
w as revised upwards to 7.1% yoy from 6.0% yoy in the advance estimate. How ever,
manufacturing contracted by 0.2% qoq SA in 1Q22, reversing the 6.3% qoq SA growth in
4Q21. This came as a result of the sudden halt in travel at the beginning of the year, which
curbed transport engineering’s momentum, as w ell as Russia’s invasion of Ukraine which
affected Mar performance. Nevertheless, the outlook for manufacturing for the rest of the
year appears strong as the demand for semiconductors and related equipment is still
robust. There is an ongoing global movement to shore up the production of chips, which
bodes w ell for Singapore’s manufacturing and non-oil domestic exports (NODX). Transport
engineering should also drive grow th substantially as Singapore has reopened faster than
expected follow ing a successful quelling of the Omicron variant.
Economic reopening bodes well for service sector laggards
The recovery in the services sector has been uneven thus far; how ever, we expect tourism reliant sectors to make considerable gains following the easing of border restrictions.
Service producing industries as a w hole rose by 4.2% yoy in 1Q22 vs. 4.4% yoy in 4Q21.
The three sectors to watch throughout the year are retail, accommodation, and food &
beverages as these three services are still significantly below the levels in 2019. How ever,
with travel steadily making its w ay towards normalisation, these three services have the
potential to be significant growth drivers this year, in our view.
Retain 2022F GDP growth forecast of 4.2%yoy despite risks
Overall, our 4.2% yoy forecast for Singapore’s GDP remains intact; however, we
acknowledge that the balance of risks is tilted to the downside. Our view s are in line with
MTI’s outlook as it pointed out the following in its GDP report today: 1) Inflation in Singapore
has risen to significant levels, weighing on both consumer and business sentiment; 2) the
Russia-Ukraine conflict as w ell as China’s zero-Covid stance have caused protracted
supply-chain complications; and 3) faster-than-anticipated monetary tightening in
advanced economies could cause financial instability and hinder export demand. This
could offset the strength in the semiconductor-related segment as w ell as the recent
reopening measures. Nevertheless, the government is planning mitigating measures which
should help to somewhat address issues, especially for supply and prices.