• Singapore’s real GDP growth declined by a smaller magnitude of -5.8% yoy in 3Q20 (-13.3% in 2Q20), supported by gradual resumption in economic activity.
• MTI revised its 2020 growth forecast to -6.5% to -6.0% from -7.0% to -5.0% previously, and anticipates a rebound to a range of 4.0% to 6.0% in 2021
• Thailand’s exports declined further by 6.7% yoy in October from 3.9% in September mainly due to the prolonged negative impact of the pandemic.

Singapore’s export-oriented industries likely to benefit from global demand

The decline in Singapore’s GDP growth in 3Q20 eased from -13.3% yoy in 2Q20 to -5.8% in 3Q20 (better than the government’s advance estimate of -7%), attributed partly to the gradual resumption in economic activity after the Circuit Breaker, which was implemented from April 7th to June 1st 2020, as well as recovery in exports from pickup in activity in other major economies. By sectors, growth was supported by expansions in manufacturing, finance and insurance as well as information and communications. On the demand side, growth was bolstered by slower declines in domestic demand and external demand. For the rest of 2020, the Ministry of Trade and Industry (MTI) expects weak external demand and travel restrictions to dampen trade-related services sectors but healthy demand for semiconductors will support the manufacturing sector. MTI revised its 2020 real GDP growth forecast to -6.5% to -6.0% from -7.0% to -5.0% previously. Going into 2021, MTI anticipates a rebound in GDP growth to a range of between 4.0% and 6.0%, led by improvement in growth of key external economies as well as expectations of easing travel restrictions. In terms of sectors, MTI anticipates trade-related services sectors, aviation- and tourism-related sectors as well as consumer-related sectors to benefit from an increase in external demand and a recovery in tourist arrivals. Meanwhile, manufacturing sector will also continue to expand led by higher demand for semiconductors as well as better demand from China and intra-regional trade.

In the same week, Singapore’s industrial production index (IPI) contracted by 0.9% yoy in October from an expansion of 25.6% in September, its first contraction since July 2020. Excluding biomedical manufacturing, industrial production fell by 2.7% yoy in October from a growth of 10% in September. By clusters, all clusters registered declines with the exception of biomedical manufacturing and precision engineering. Going forward, the slight decline in IPI could be momentary as the electronics cluster is anticipated to be continually supported by the healthy global demand for semiconductors. However, the downside risk will likely be from lower external demand from some advanced countries following additional waves of cases.

Separately in Thailand, exports declined further for the sixth consecutive month by 6.7% yoy in October from 3.9% in September mainly due to the prolonged negative impact of the pandemic. Meanwhile, imports fell by 14.3% yoy from -9.1% yoy in September. We believe that the anticipated rebound in global economic activity following the easing of restrictions and fiscal and monetary support will continue to support external demand for Thailand’s exports. However, downside risk remains from rising number of Covid-19 cases in some main trading partners.

Source: Affin Hwang Research - 27 Nov 2020