Singapore’s economy posted a surprising performance during the first three months of the year, growing at a significantly faster pace than previous estimates put out by the government. According to data released by the Ministry of Trade and Industry (MTI), Singapore’s Q1 2021 GDP came in at +1.3%, beating the official estimate for a 0.2% growth and also economists’ forecast for a 0.9% growth.

The economy posted a strong performance, powered by increased activity across key sectors, including manufacturing, finance and insurance as well as wholesale trade. However, despite the stronger than expected GDP reading, the MTI has kept its economic growth forecast for the year steady, expecting the economy to grow by 4-6% through 2021, as the pandemic continues to drive uncertainties, especially amid the recent resurgence in cases.

In April, the government had sounded more upbeat, anticipating that Singapore’s 2021 GDP could come in higher than 6% but with the nation reporting a daily spike in fresh coronavirus cases once again, there is an increased likelihood of bringing back restrictions and lockdowns, which could cloud the outlook in the near-term. A stronger than expected performance will have to depend on robust external demand going forward, but the pandemic still offers several downside risks that could hamper performance.

Since the beginning of the coronavirus pandemic, the Singapore government has rolled out over SGD 100 billion worth of stimulus measures while the central bank, MAS, continues with its monetary easing policies. The MAS is scheduled to review its monetary policy again in October and has stated that it could consider the pace of economic recovery and its impact on inflation before making any changes to its policy.

Impact on the SGD

The USD/SGD currency pair continues to trade bearish following the release of this news, which offers support to the Singapore dollar and increase the bearish pressure on the pair. In addition, an extended weakness in the US dollar has also contributed to the recent weakness seen in this forex pair.