Singapore: Revised Q2 GDP contracted 0.2% - UOB

UOB Group’s Senior Economist Alvin Liew comments on the revised Q2 GDP figures in Singapore.

Key Takeaways

“Singapore’s final 2Q 2022 GDP was revised lower sequentially to a contraction of 0.2% q/q SA (versus prelim print of 0.0% q/q SA) after recording a downwardly revised 0.8% expansion in 1Q (from 0.9% previously). Compared to a year ago, GDP grew by 4.4% y/y in 2Q (down from prelim estimate of 4.8% y/y), from a downwardly revised 3.8% in 1Q (from 4.0% previously).”

“The momentum in services was revised to -0.1% q/q (from +0.2%) while the construction sector showed momentum being revised slower to +0.9% q/q (from +1.9%). Only manufacturing sector saw a slight pickup in momentum, to +0.4% q/q (from +0.3%).”

“In addition to the 2Q GDP downward revision, the message from the MTI was one of greater caution as external outlook has deteriorated materially compared to three months ago and it highlighted four well-telegraphed external risks: 1) the Russia-Ukraine conflict, 2) monetary policy tightening stance in the advanced economies, 3) geopolitical risks, and 4) COVID-19 risk of potential new variants.”

“Taking into account of the external outlook and these risk factors, the MTI has now narrowed the GDP growth forecast for 2022 to 3.0-4.0%, from the previous range of 3.0-5.0% while the Enterprise Singapore (ESG) upgraded Singapore’s non-oil domestic exports growth forecast to 5.0-6.0% for 2022 from the previous forecast range of 3.0-5.0%. We are comfortable to keep our GDP growth outlook for Singapore unchanged at 3.5% for 2022, before easing to 2% for 2023 to reflect the uncertain external outlook next year. Our full-year NODX growth and manufacturing growth forecasts for 2022 also remain unchanged at 5% and 4.5% respectively.”

“MAS Outlook – The latest 2Q GDP revision and narrower official GDP growth forecast range does not change our view on Singapore’s monetary policy, which we believe has entered into a restrictive setting after four rounds of tightening since Oct 2021. We think Oct 2022 MPS tightening is still on the cards but we believe off-cycles are likely done for 2022 unless core inflation surprises well above 4% in the next few months.”