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Singapore cuts 2023 growth forecast to between 0.5 to 1.5% amid gloomy external demand

Amidst global economic challenges, Singapore’s GDP for Q2 2023 grew 0.5% year-on-year. While sectors like manufacturing contracted, construction, trade, and real estate showed resilience. Ministry of Trade and Industry adjusts 2023 GDP growth forecast to “0.5 to 1.5%” in light of current global developments.



SINGAPORE: In a move reflecting cautious optimism mixed with heightened global economic concerns, Singapore has narrowed its GDP growth outlook for 2023.

The Ministry of Trade and Industry (MTI) announced on Friday that it expects this year’s gross domestic product (GDP) to be between 0.5 to 1.5 per cent. This is a trimmed forecast from the previously projected range of 0.5 to 2.5 per cent.

According to data released, the nation’s economy registered a 0.5 per cent year-on-year growth in the second quarter, modestly below the initial estimate of 0.7 per cent.

However, this marks a minor uptick from the 0.4 per cent growth observed in the first quarter. On a seasonally-adjusted quarter-on-quarter basis, there was a 0.1 per cent expansion between April and June.

Although this suggests a positive trend reversal from a 0.4 per cent contraction in Q1, it still falls short of the 0.3 per cent advance forecast.

For the first half of 2023, Singapore’s GDP growth averaged a conservative 0.4 per cent year-on-year.

In its latest quarterly report, MTI cited “weak” external demand as the reason for its revised outlook. T

he report pinpointed expected slowdowns in Singapore’s major external economies and a protracted downturn in the global electronics sector. Any signs of recovery in the latter are anticipated only towards the year-end or later.

Global economic uncertainties continue to loom large. Persistent inflation in advanced economies might herald stricter global financial conditions, resulting in reduced global expenditure and exacerbating the current manufacturing slump.

Additionally, the ongoing conflict in Ukraine and mounting geopolitical tensions threaten to disrupt supply chains, diminish consumer and business morale, and impede global trade.

The local manufacturing sector, accounting for approximately 20% of the economy, faces a bleak outlook for the rest of the year.

Main challenges include potential output reductions in the electronics and precision engineering clusters, attributed to the global electronics slump.

The finance and insurance sectors are also forecasted to experience stunted growth due to external economic frailty and stringent financial conditions.

However, not all is grim. MTI highlighted positive trajectories in certain areas, with the aviation and tourism sectors expected to benefit from the resurgence in international air travel and inbound tourism.

Furthermore, consumer sectors like retail trade and food & beverage services will likely see growth, bolstered by a robust labour market and tourism rebound.

In the ministry’s words, “Taking into account the performance of the Singapore economy in the first half of 2023, as well as the latest global and domestic economic developments, MTI has narrowed the GDP growth forecast for 2023 to 0.5 to 1.5 per cent, from 0.5 to 2.5 per cent.”

Sectorial Insights:

  • Manufacturing: A concerning contraction of 7.3 per cent was observed, surpassing the 5.4 per cent shrinkage in Q1.
  • Construction: Remained stable with a growth of 6.8 per cent, reflecting similar patterns from the previous quarter.
  • Wholesale Trade: Demonstrated a promising turnaround with a growth of 1.1 per cent, bouncing back from a 1.7 per cent decline in Q1.
  • Retail Trade: Continued to exhibit positive signs, growing at 2.6 per cent.
  • Transportation & Storage: Witnessed a robust growth of 4.6 per cent, largely influenced by water transport activities and an uptick in cargo handled at Singapore’s ports.
  • Accommodation: Benefited from international visitor arrivals, expanding by an impressive 13.0 per cent.
  • Food & Beverage Services: Moderated growth was seen at 5.7 per cent, influenced by higher sales volumes in cafes, food courts, and fast food outlets.
  • Information & Communications: Reported a growth of 5.0 per cent, however, this was slightly muted compared to 6.5 per cent in Q1.
  • Finance & Insurance: Continued to face challenges with a contraction of 1.7 per cent, which follows the 1.1 per cent decline in Q1.
  • Real Estate: Spurred by private residential property and office spaces, this sector grew by 12.0 per cent.
  • Professional Services: Showed modest growth at 1.7 per cent.
  • Administrative & Support Services: Grew at 6.3 per cent.
  • Other Services Industries: Expanded at 3.8 per cent.
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