Mizuho Flash – Singapore Q1 GDP Flash Preview: Of Flutter & Flatter

By Vishnu Varathan, Head, Economics & Strategy, Asia & Oceania Treasury Department, Mizuho Bank, Ltd.,

Singapore’s Growth: Of Flutter & Flatter

Our base case is for a flutter of surprise of positive Q1 GDP growth (albeit modestly so), driven by sustained improvement in economic activity and external demand conspiring with a booming property market. But this does not distract from an exceptionally low pandemic base that flatters the state of recovery. The upshot being the MAS’ policy calculus for prolonged accommodation will be unfettered by headline GDP growth, which overstates not only the recovery in levels but also how steadfast and even the recovery path ahead is.

Improvement All Around

Further resumption of domestic activity, although still far short of pre-Covid levels, alongside a pick-up in global demand coinciding with a defiantly robust demand-driven surge in the property market point to a potential for an upside surprise in Q1 GDP for Singapore. Specifically, a sustained surge in industrial production, imaginably accentuated by pent-up demand, spilling over more clearly into exports (NODX) is expected to flatter the boost from external demand; complemented by significantly improved retail sales amid incremental relaxation to social activity (Chart 1). Combined with the near-exuberance in the property market, which tends to have a fairly larger multiplier via construction/services, banking and retail channels, activity indicators are suggesting an upside surprise to Q1 GDP to eke out a modest positive growth; out-performing the consensus for a contraction (albeit less severe than Q4).

But from a very Soft Base

Nonetheless, as outlined our MAS Preview*, the depth of drop in economic activity through 2020 triggered by Covid-19 exceeds the worst of past economic recessions, including the “Dot Com” (2001-2002) and GFC (2008 2009) crises. And so, with the loss of output in relative levels being unprecedented, the recovery to be expected is also likely to be over a longer course, which is almost certain to be as uneven as it is bumpy.