Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Singapore's economy has continued to recover from the COVID-19
pandemic in the first half of 2022. The advance estimate of GDP for
the second quarter of 2022 was up 4.8% year-on-year (y/y), after
growth of 4.0% y/y in the first quarter. This follows GDP growth of
7.6% in 2021 as the economy rebounded from the impact of the
COVID-19 pandemic. Singapore's manufacturing output grew by 13.8%
y/y in May 2022.
Despite the economic disruptions caused by the COVID-19
pandemic, Singapore has continued to attract strong foreign direct
investment inflows, notably into electronics and pharmaceuticals
manufacturing. A number of new vaccine manufacturing plants are
currently under construction in Singapore, including by Sanofi,
BioNTech and Hilleman Laboratories.
Economic recovery continues
The Singapore economy grew by 4.8% y/y in the second quarter of
2022, according to the advance estimate of GDP released by
Singapore's Ministry of Trade and Industry (MTI). However, second
quarter GDP was unchanged on a quarter-on-quarter,
seasonally-adjusted basis, compared to the 0.9% expansion in the
first quarter of 2022.
Manufacturing output rose by 8.0% y/y in the second quarter,
driven by rapid expansion in electronics and precision engineering
output. Construction output grew by 3.8% y/y in the second quarter,
with the easing of border restrictions having helped migrant labor
inflows for the construction industry. The service sector also
recorded expansion of 4.7% y/y in the second quarter of 2022.
Growth in the food services sector was boosted by easing of
pandemic-related restrictions on restaurants and other food outlets
during the second quarter.
The headline seasonally adjusted S&P Global Singapore
Purchasing Manager's Index™ (PMI™) had meanwhile posted 57.5 in
June, still signaling strong expansion, albeit down from 59.4 in
May. The latest headline reading marked a nineteenth consecutive
month where the PMI printed above the 50.0 neutral threshold, to
indicate protracted economic recovery from the severe economic
impact of the COVID-19 pandemic in 2020.
In line with higher activity, the PMI showed order book volumes
increasing at the second-fastest rate in the survey's history in
June, with export orders up sharply. Singapore's total exports rose
by 12.4% y/y in June, according to trade data from Export
Singapore. Anecdotal evidence suggested that the continued
loosening of COVID-19 restrictions improved overall demand
conditions across Singapore's private sector.
Due to the importance of the electronics industry as a key
sector for Singapore's manufacturing output and exports, the
continued strength of global electronics demand is expected to
continue to underpin expansion in Singapore's electronics sector in
the second half of 2022.
In May 2022, Singapore's electronics exports continued to show
strong growth, up 12.9% y/y. Exports of integrated circuits rose by
26.6% y/y, while exports of disk media products rose by 10.3% y/y.
Exports of electronics products to Malaysia showed buoyant growth
of 55% y/y, while electronics exports to the US were up 21% y/y and
to South Korea by 20% y/y.
The headline seasonally adjusted S&P Global Electronics PMI
has moderated during the first half of 2022, reaching a 20-month
low of 53.7 in June, down from 54.2 in May. While still indicative
of expansionary conditions in the global electronics manufacturing
sector the latest data highlighted a further slowdown in growth, as
both output and new orders rose at fractional rates.
June survey data highlighted a further softening of new orders
growth at global electronics producers. Overall, new orders
increased at the weakest pace since September 2020, leading some
firms to restrict their purchasing activity.
However, ongoing supply issues for raw materials and other
inputs and the recent Omicron COVID-19 waves in various industrial
economies in East Asia have continued to impact on global
electronics production.
The outlook for the global electronics industry in 2022
continues to be impacted by lengthy suppliers' delivery times,
notably for supply of semiconductors. The S&P Global
Electronics PMI Supplier's Delivery Times Index continued to post
below the 50.0 no-change mark gain in June, signaling continued
delays in vendor performance. Raw material shortages and issues
with transport were often cited by survey respondents, with
companies also commenting on continued disruption in China and
strikes by workers in the supply chain. That said, the extent to
which delivery times lengthened was the weakest since November
2020.
Global electronics producers faced another steep monthly rise in
their average input costs during June. Anecdotal evidence
highlighted a variety of inflationary sources including raw
materials, energy and oil. Approximately 50% of survey respondents
recorded higher operating expenses, compared to around 3% that
noted a fall.
Rising inflation pressures
According to the latest S&P Global Singapore PMI survey,
inflationary pressures persisted in June, largely driven by a
faster rise in input costs which caused firms to raise selling
prices at the fastest pace since data were first available in
2012.
The Singapore CPI also has shown increasing inflation pressures
during the first half of 2022. The CPI reading for May 2022 showing
an increase of 5.6% y/y, while the MAS Core Inflation measure rose
to an average of 3.4% year-on-year in April and May. The MAS
(Monetary Authority of Singapore) expects that inflationary
pressures will remain elevated in the months ahead, with MAS Core
Inflation projected to rise slightly above 4% in the near term. The
MAS has raised its forecast for CPI-All Items inflation to a range
of 5.0-6.0%, higher than the earlier forecast range of
4.5-5.5%.
Since October 2021, MAS has been on a path of gradual monetary
policy tightening due to rising underlying inflation and sustained
economic recovery. With inflation pressures continuing to rise, the
MAS decide to tighten monetary policy further on 14th July, by
re-centering the mid-point of the S$NEER policy band up to its
prevailing level, but without changing the slope and width of the
band. This policy move is intended to slow the momentum of
inflation and ensure medium-term price stability.
Medium term growth drivers
There are significant uncertainties facing the global economy in
the near-term, which continue to pose downside risks to Singapore's
economic outlook for the second half of 2022 and into 2023. These
include the ongoing global risks to world growth from the
Russia-Ukraine war, as well as the impact of rising global
inflation and monetary policy tightening by many central banks.
China's mainland economy slowed sharply in the second quarter of
2022 due to the impact of pandemic-related restrictive measures in
a number of major cities. The risk of new COVID-19 outbreaks in
China also remains a key uncertainty for the near-term outlook,
after China's economy slowed sharply in the second quarter of 2022
due to the impact of restrictive measures in several large cities
to contain COVID-19 outbreaks.
Taking into account these various downside risks to the outlook,
Singapore's GDP growth is projected by the MTI to come in at the
lower half of the 3-5% forecast range for the 2022 calendar
year.
However, the Singapore economy has made significant progress
towards normalisation of its economy during the first half of 2022,
notably through the reopening of international borders. This is
helping to boost international tourism flows as well as supporting
the gradual recovery of the Meetings, Incentives, Conferences and
Exhibitions industry. Substantial lifting of COVID-19 related
restrictions has also boosted the food services industry, with
restaurants and cafes showing a strong rebound in activity levels.
The manufacturing sector is also continuing to show sustained
expansion, buoyed by strong electronics exports.
Singapore has also attracted significant new foreign direct
investment inflows into the manufacturing sector. Singapore remains
a leading Asian hub for advanced manufacturing industries such as
electronics and pharmaceuticals.
Due to supply chain disruptions and severe delays in supply
times for key components in the global electronics industry during
the COVID-19 pandemic, electronics firms are increasingly
diversifying their supply chains. Southeast Asia is an important
part of the global manufacturing supply chain, notably for the
electronics and automotive industries, which also helps to boost
Singapore's role as an exporter of electronics products to other
ASEAN nations. Electronics multinationals have announced major new
foreign direct investment into Southeast Asian nations, including
Singapore, Vietnam and Malaysia since 2020, as global demand for
electronics has risen strongly. New foreign direct investment
continues to flow into Singapore from global electronics
multinationals. GlobalFoundries will open a new semiconductors
plant in Singapore in 2023, creating an estimated 1,000 new
jobs.
Singapore will also continue to be a leading APAC hub for
biomedical manufacturing, notably for pharmaceuticals. The COVID-19
pandemic has triggered a number of major new investments into
vaccine manufacturing in Singapore, as APAC regional demand for
vaccines is projected to grow rapidly. Sanofi is building a new
vaccine facility in Singapore that will open in 2025, while
Hilleman Laboratories as well as BioNTech also establishing vaccine
manufacturing plants in Singapore.
Despite the impact of the COVID-19 pandemic, Singapore's
medium-term growth outlook remains favorable, supported by its role
as a leading international financial services hub as well as an
Asia-Pacific hub for shipping, commercial aviation and logistics.
These competitive advantages have also continued to support
Singapore's attractiveness as a regional headquartering hub for
global multinationals.
Rajiv Biswas, Asia Pacific Chief Economist, S&P
Global Market Intelligence
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
