A man wearing a mask strolling in Marina Bay Sands in the background of Singapore Central Business District on April 1, 2020.

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SINGAPORE – Singapore’s economy grew for the first time since the Covid-19 outbreak.

The Southeast Asian economy grew 0.2% year over year in the first quarter of 2021, official forecasts showed on Wednesday. This is the country’s first economic growth since the fourth quarter of 2019.

Analysts polled by Reuters had expected the economy in Singapore to shrink 0.2% year over year in the first quarter.

Seasonally adjusted, the economy grew by 2% compared to the previous quarter, said the Ministry of Trade and Industry in Singapore in a statement.

This is how the various industries developed in the first three months of 2021:

  • The goods manufacturing industry grew by 3.3% compared to the previous year, which was supported by an increase in production output of 7.5%.
  • However, construction continued to decline, albeit at a slower pace of 20.2% compared to 27.4% in the previous quarter.
  • The service industry shrank by 1.2% year-on-year.

Alex Holmes, Asian economist with consulting firm Capital Economics, said the economy in Singapore should continue to recover in the coming quarters.

“The export sector will remain strong with buoyant global demand for semiconductors, advanced manufacturing equipment and pharmaceutical components,” he said in a note following the latest data release.

The main headwinds for the Singapore economy are tight travel restrictions, Holmes said. He said reopening the border will likely be a gradual process, so ongoing weakness in aviation, as well as retail and hospitality, will hold back the recovery.

Singapore reported the worst economic recession ever last year, when it contracted 5.4% as lockdown measures to slow the spread of Covid-19 led to a collapse in activity around the world.

The central bank is maintaining its policy

In a separate press release, the Monetary Authority of Singapore – the country’s central bank – said it had kept its policies unchanged.

The MAS manages monetary policy by setting the exchange rate rather than interest rates by allowing the Singapore dollar to rise or fall against a basket of currencies within an undisclosed range. It adjusts the belt using three levers: the slope, the center and the width.

On Wednesday, the central bank announced that it had held its policy band – known as the Singapore dollar’s nominal effective exchange rate – at an annual appreciation rate of 0%. The width and center of the ribbon remained unchanged, it said.

The MAS explained its political stance, saying that although Singapore’s economy will continue to grow, the sectors hardest hit by the Covid crisis would continue to face problems.

It adds that core inflation will “only gradually increase” by 0% to 1% this year. Core inflation rules out housing and private transport and is the preferred price measure of the MAS.

The central bank said Singapore’s economic growth is likely to exceed the upper end of the official forecast range of 4% to 6% for 2021, provided that the global economy is not adversely affected.