SINGAPORE’S economy is forecast to grow at between 0.5 per cent and 2.5 per cent in 2023, while the official full-year growth forecast for 2022 has been narrowed to “around 3.5 per cent”, according to data from the Ministry of Trade and Industry (MTI) on Wednesday (Nov 23).
This follows the Monetary Authority of Singapore’s (MAS) previous forecast for growth to slow to a pace that is “below trend” in 2023.
The updated forecasts come as third quarter growth was revised downwards to 4.1 per cent year-on-year, slower than both the earlier advance estimate of 4.4 per cent, and the 4.5 per cent growth recorded in Q2.
But on a seasonally-adjusted, quarterly basis, Q3 GDP was up 1.1 per cent on the quarter before, a reversal from Q2’s 0.1 per cent contraction, MTI said.
Meanwhile, the latest full-year growth forecast comes after MTI earlier narrowed the forecast range to 3 to 4 per cent in August, from a previous projection of 3 to 5 per cent.
The 2022 full-year forecast takes into account the performance of Singapore’s economy in the first three quarters, when growth averaged 4.2 per cent year-on-year, as well as the latest external and domestic developments, said MTI.
Since August, the external demand outlook for Singapore has softened further due to the weaker outlook for the Eurozone amid an energy crunch, as well as for China as it continues to battle recurring Covid-19 outbreaks and a property market downturn.
This weaker economic outlook will thus weigh on the growth of outward-oriented sectors in Singapore, including the key electronics and chemicals clusters, said MTI.
On the flipside, the strong recovery in air travel and international visitor arrivals is expected to continue to uplift the aviation- and tourism-related sectors, as well as consumer-facing sectors like food and beverage services. The lifting of travel curbs in Singapore and the region has also boosted the recovery of the professional services sector, said the ministry.
For 2023, growth rates in most major economies are expected to moderate further from 2022 levels, with sharp slowdowns expected in the United States and Europe. Global supply chain disruptions due to Russia’s war in Ukraine are expected to persist, though they may be less extensive and frequent, said MTI.
At the same time, significant downside risks remain, including the growth impact of rising interest rates in many advanced economies; possible financial stability risks if there are “disorderly market adjustments” to such monetary tightening; further escalations in the war in Ukraine; and geopolitical tensions among other major global powers.
As such, the growth for Singapore’s outward-oriented sectors – including semiconductors as well as machinery and systems – is expected to weaken further in the next year, said MTI. The slowdown in major external economies is also expected to dampen growth in sectors such as wholesale trade, water transport, and finance and insurance sectors.
Nevertheless, some bright spots remain. The aviation- and tourism-related sectors are expected to remain buoyed by the continued recovery of air travel and international arrivals.
Wednesday’s release also gave a sectoral breakdown of Q3 growth. Manufacturing grew by 0.8 per cent year on year, much slower than the 5.6 per cent growth in Q2. Expansions in transport engineering, general manufacturing and precision engineering offset declines in electronics, chemicals and biomedical output.
Construction growth picked up to 7.8 per cent, from 4.8 per cent previously, on the back of both public and private sector construction output.
The overall services sector expanded by 5.8 per cent, up from 5 per cent in the quarter before. Food and beverage services saw the biggest increase, growing 30.5 per cent year-on-year on the back of strong pick-up in sales volumes at food caterers, restaurants, cafes, food courts and other eating places.
The accommodation services segment was the only industry with negative growth, extending previous quarters’ contractions to shrink 1.9 per cent.