Singapore Q1FY21 GDP Growth- Some Green Shoots are visible now

Singapore has begun the FY21 on a great note. Its economy has registered a better-than-expected GDP growth of 0.2% in Q1FY21 Vs Q1FY20 (same quarter last year). Though, the consensus estimates for this quarter was a contraction of 0.2%. This was a great performance by all measures, as till Q1FY20, the economy was operating with lesser COVID19 related restrictions. GDP growth in Q1FY20 was 0%. So, a growth of 0.2% over Q1FY20 gives an impression that the economy has reached its pre-COVID level state now.

This positive GDP growth in Q1FY21 has come after 3 successive contractions –

  • Q2FY20 -> -13.3%
  • Q3FY20 -> -5.8%
  • Q4FY20 -> -2.4%

Sectoral breakdown of Nominal GDP

Sector-wise performance for Q1FY21   

  • Manufacturing sector (which constitutes almost 20.9% of overall GDP) grew by 7.5% on YoY basis.
  • Construction Sector (which constitutes almost 3.7% of overall GDP) contracted by 20.2% on YoY basis.
  • wholesale and retail trade (which constitutes almost 17.3% of overall GDP) contracted by 4.1% on YoY basis.
  • Transportation & storage (which constitutes almost 6.7% of overall GDP) contracted by 4.1% on YoY basis.
  • information and communications, finance & insurance and professional services sectors (which constitutes almost 33% of overall GDP) grew by 3.7% on YoY basis.
  • accommodation & food services, real estate, administrative & support services and other services industries sectors (which constitutes almost 17.2% of overall GDP) contracted by 3.9% on YoY basis.

What Does this mean for Subsequent Quarters in FY21?

The better-than-expected growth in Q1FY21 augurs well for the subsequent quarters in FY21 as economy was reeling under severe containment measures since April 2020 (e.g. Circuit breaker was imposed in April-2020). So, GDP growth in subsequent quarters is expected to be quite higher. MAS expects the growth to exceed the upper end of official forecast range of 4-6%. This is a sharp uptrend after witnessing a dismal performance of 5.4% contraction in the previous year because of COVID19.

What is the Outlook for SGD in FY21?

MAS, encouraged by better than expected Q1FY21 number, has kept its monetary policy setting unchanged. i.e. monetary will continue to be accommodative. The USD/SGD exchange rate is hovering at 1.34 Level as on 14th April EOD. MAS may start its tapering exercise by October this year. This may put downward pressure on its exchange rate. There is a scope for near-term declines in USD/SGD ahead.

Taking a look at the MAS approach to SGD, it left the slope (at 0% appreciation), width and center of the currency band unchanged.

The MAS primarily conducts policy by managing exchange rates rather than benchmark lending rates (in majority of the other countries). It does this by adjusting SGD against an undisclosed basket of currencies, known as the Singapore Dollar Nominal Effective Exchange Rate. This is owing to the Singapore economy’s heavy reliance on trade.  

What is the Outlook for inflation in FY21?

  • Core inflation is expected to rise gradually, but will remain within the range of its historical average
  • all-items CPI is expected to be in a range of 0.5% – 1.5% in FY21.


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Published by Amit


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