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Singapore economy shrinks 5.8% last year, less than expected

This article is more than 12 months old

Singapore closed its worst year of economic performance on an optimistic note with the economy shrinking less than expected.

Gross domestic product (GDP) contracted by 5.8 per cent last year amid disruptions from the pandemic, noted Ministry of Trade and Industry (MTI) advance estimates yesterday.

The full-year growth is an improvement on the MTI's earlier forecast of a contraction of 6.5 per cent to 6 per cent made last November and much lower than its previous estimate of a 7 per cent to 5 per cent shrinkage.

While the recession wreaked havoc across a broad swathe of the economy and wiped out thousands of jobs, Singapore's success in containing the spread of Covid-19 and the subsequent lifting of mobility restrictions in the final two quarters helped alleviate the growth slump.

If reaffirmed next month, when MTI releases its next economic survey report, the record downturn would be less than the minus 6 per cent that most private forecasters, including those at DBS Bank and OCBC Bank, had expected.

The economy shrank by 3.8 per cent year on year in the final three months of 2020 after a revised 5.6 per cent drop in the third quarter, as more coronavirus-related curbs on economic activities were lifted.

The GDP contracted by 0.2 per cent in the first quarter and by a historic 13.4 per cent in the second quarter.

MTI's fourth-quarter estimate is more positive than the median forecast of a 4.5 per cent year-on-year drop by economists in a Reuters poll.

Mr Jeff Ng, senior treasury strategist at HL Bank, said the better-than-expected fourth-quarter performance reflects Singapore's success in containing Covid-19 cases, which in turn enabled economic activity to improve from the previous quarter.

The economy grew 2.1 per cent on a quarter-on-quarter seasonally adjusted basis, following the 9.5 per cent expansion in the third quarter.

This was bolstered by the phased resumption of activities following the April-to-June circuit breaker period and the rebound in major economies during the quarter as they emerged from their lockdowns.