GDP growth to slow down to 3-5% in 2022, from 7% in 2021

MTI cited four downside risks that will affect the economy's growth next year.

Singapore’s gross domestic product (GDP) is expected to grow by 7% in 2021, but will eventually slow down come 2022 to 3% to 5%, the Ministry of Trade and Industry (MTI) said.

MTI said there are four downside risks that will affect the growth of Singapore's economy: the trajectory of the COVID-19 pandemic; constraints on global industrial production due to global supply disruptions; more persistent inflation due to protracted supply disruptions, stronger pickup in demand, and rising energy commodity prices; and continued geopolitical uncertainty involving the major economies.

Recovery for various sectors of the economy in 2022 is also likely to remain uneven, according to the MTI.

In particular, MTI said the accommodation sector will be “weighed down by a projected decline in domestic demand due to the tapering of government demand, as well as lower staycation demand with the relaxation of travel restrictions.”

On the other hand, MTI expects gradual growth in aviation- and tourism-related sectors, manufacturing and wholesale trade, consumer-facing sectors, and construction and marine & offshore engineering sectors.

MTI, however, underscored that not all segments in the aforementioned sectors will return to pre-pandemic levels by end-2022 like department stores for the retail trade sector and food & beverage services for consumer-facing sectors.

Q3 2021 performance

The uneven recovery amongst sectors was also seen during the third quarter of 2021, but on the flip side, there were more expansions than contractions.

The sectors which recorded year-on-year (YoY) growths for the quarter were the manufacturing sector by 7.2%; finance & insurance sector by 9.0%; real estate sector by 16.8%; professional services sector by 4.4%; transportation & storage sector by 8.2%; retail trade sector by 0.7%; information & communications sector 10.4%; wholesale trade sector by 5.9%; construction sector by 66.3%; and other services industries by 4.4%.

The YoY growths recorded for 3Q2021, however, were also slower than the preceding quarter for all sectors except for the information & communications sector which had the same space of growth, and the wholesale trade sector which had a faster growth compared to the previous quarter which was  3.4%.

The administrative and support services sector, food and beverage services sector, and accommodation sector, on the other hand, recorded contractions for Q32021, shrinking by 1.3% YoY, 4.2% YoY, and 4.1% YoY, respectively.

Taking into account these latest developments, the GDP grew 7.1% YoY for Q3, which then brought GDP growth in the first three-quarters of 2021 to 7.7%. 

Given these figures, the MTI has set its GDP forecast in its upper range of 7.0%.

The 7.1% YoY Q3 2021 GDP growth also beat the market and OCBC Treasury Research’s expectations of 6.5%.

OCBC said the GDP growth for the quarter was remarkable given that “the return to Phase 2 (Heightened Alert) from 22 July to 18 August to contain the COVID clusters did not make as much of a dent on the Singapore economy as initially expected as momentum accelerated in September.”