Singapore's economy contracted by 5.8% year over year in the third quarter, the Trade and Industry Ministry said Monday. It had seen a 13.3% contraction in the second quarter.
However, it expanded by 9.2% on a quarter-on-quarter seasonally adjusted basis compared with a 13.2% contraction in the second quarter.
Singapore share prices rose 1% to a more than eight-month high Monday after the gross domestic product data showed the economy is set to return to growth next year. The Singapore benchmark hit its highest since March 11 as the economy contracted less than initially estimated in the third quarter and is forecast to bounce back to growth next year.
Singapore benefited from a gradual easing of its COVID-19 lockdown measures, though investors remain cautious about the outlook as world infections rise and fresh restrictions are implemented to curb them.
"The real concern will be how external demand response is going into 2021," Singapore-based DBS Bank macro strategist Chang Wei Liang said.
"The fear is that a resurgence of COVID-19 cases in the U.S. and Europe will drag down the demand as Singapore is quite externally dependent. But for now, I think the sentiment is still on the more positive side with the expectation that a vaccine will be pushed out next year."
Singapore Airlines and in-flight catering service provider SATS shares, however, fell 1% each as a travel bubble between Hong Kong and Singapore was postponed for two weeks.
Meanwhile, the ministry's report said "the improved performance of the Singapore economy came on the back of the phased resumption of activities in the third quarter following the (restrictions) that were implemented between April and June as well as the rebound in activity in major economies during the quarter as they emerged from their lockdowns," it said.
The manufacturing sector expanded by 10.0% year-on-year reversing the 0.8% decline in the preceding quarter. "The expansion was largely due to output growth in the electronics, biomedical manufacturing and precision engineering clusters which more than offset output declines in the transport engineering and general manufacturing clusters.
"In particular, output increases in the electronics and precision engineering clusters were due to strong global demand for semiconductors and semiconductor equipment respectively. On a quarter-on-quarter seasonally adjusted basis, the manufacturing sector grew by 12.1% - rebounding from the 9.1% contraction in the previous quarter."
"The air transport segment was weighed down by the continued slump in air passengers handled at Changi Airport due to ongoing global travel restrictions and sluggish air travel demand," the ministry said.
With the local outbreak of COVID-19 largely under control, the Singapore economy is now "on the mend," DBS, the country's largest bank, said.
"Despair and disappointment that had dominated the global backdrop for much of the year is gradually giving way to hope and optimism of a recovery as we head into 2021," DBS said in a Singapore outlook report.
DBS expects Singapore's economy to contract by 6% this year before rebounding to a growth of 5.5% in 2021.
