Asia Economy

Singapore's economy shrinks at a slower pace as it reopens from coronavirus partial lockdown

Key Points
  • Singapore's economy contracted by 7% in the third quarter compared with a year ago, according to official estimates released by the Ministry of Trade and Industry.
  • On a quarter-on-quarter seasonally adjusted basis, the Singaporean economy rebounded by 7.9% in the July-to-September period, the ministry said.
  • The country's central bank — Monetary Authority of Singapore — said it kept its exchange-rate based monetary policy on hold.
A man wearing a protective face mask walks past an indoor waterfall at Jewel Changi Airport in Singapore.
Roslan Rahman | AFP | Getty Images

SINGAPORE — Singapore's economic contraction slowed in the third quarter this year, as the country allowed more activities to resume after a partial lockdown, according to official estimates released by the Ministry of Trade and Industry.

The Southeast Asian economy contracted by 7% in the third quarter compared with a year ago, the ministry said. That slightly missed the 6.8% year-over-year contraction forecast by a Reuters poll of analysts, and was slower than the revised 13.3% year-on-year decline in the previous quarter.

On a quarter-on-quarter seasonally adjusted basis, the Singaporean economy rebounded by 7.9% in the July-to-September period, the ministry said. That's a reversal from the 13.2% contraction in the second quarter.

"The improved performance of the Singapore economy in the third quarter came on the back of the phased re-opening of the economy following the Circuit Breaker that was implemented between 7 April and 1 June 2020," the ministry's statement read, referring to the partial lockdown in the country that was aimed at blunting the spread of the coronavirus.

Here's how the different sectors performed in the third quarter:

  • Construction registered the largest quarter-on-quarter growth of 38.7%. But on a year-on-year basis, the sector shrank by 44.7%;
  • Services-producing industries grew 6.8% in the quarter ended September compared with the previous three months, but contracted by 8% year over year;
  • Manufacturing expanded by 3.9% quarter-on-quarter and 2% year-on-year.

Central bank holds policy steady

In a separate release, the country's central bank — the Monetary Authority of Singapore — said it kept its exchange-rate based monetary policy on hold.

In March, the central bank made one of its most aggressive easing moves in years by flattening the Singapore dollar exchange rate band's rate of appreciation and shifting its center lower. The band measures the Singapore dollar against a basket of currencies.

The Singapore economy is expected to see a recovery in 2021, alongside receding disinflation risk. However, the underlying growth momentum will be weak...
Monetary Authority of Singapore

The MAS explained its latest policy decision on Wednesday, and said that while the Singapore economy is recovering, sequential growth is expected to slow in the final quarter of 2020 and remain modest next year. It added that external demand has remained cautious, while restrictions on cross-border travel have continued — factors that are likely to weigh down the country's economic prospects.

"The Singapore economy is expected to see a recovery in 2021, alongside receding disinflation risk. However, the underlying growth momentum will be weak, and the negative output gap will only narrow slowly in the year ahead," said the central bank.

Singapore is forecast to contract by between 5% and 7% this year compared with last year. Inflation is likely to stay low, with the MAS projecting consumer prices to register a change of between -0.5% and 0% this year.