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Singapore’s economic growth forecast to slow in 2023 to 0.5% to 2.5% amid global uncertainties

Singapore's GDP growth this year has been narrowed to around 3.5 per cent, said MTI.

02:51 Min
Singapore’s economic growth is forecast to slow to 0.5 per cent to 2.5 per cent in 2023 amid global uncertainties, down from the projected 3.5 per cent growth this year, the Ministry of Trade and Industry (MTI) said on Wednesday (Nov 23). Michelle Teo reports.

SINGAPORE: Singapore’s economic growth is forecast to slow to 0.5 per cent to 2.5 per cent in 2023 amid global uncertainties, down from the projected 3.5 per cent growth this year, the Ministry of Trade and Industry (MTI) said on Wednesday (Nov 23).

The gross domestic product growth for this year was narrowed from 3 per cent to 4 per cent.

Since August, Singapore’s external demand outlook has softened further due to the weaker outlook for the Eurozone economy amid an energy crunch, as well as for China as it grapples with recurring COVID-19 outbreaks and a property market downturn, said MTI.

In its forecast for 2023, MTI said the GDP growth rates in most major economies are expected to moderate further from 2022 levels, with sharp slowdowns projected in the US and the Eurozone.

Global supply disruptions are likely to continue into next year as the war in Ukraine continues, although the extent and frequency of disruptions are expected to ease.

In the third quarter of this year, Singapore's economy expanded by 4.1 per cent year-on-year, easing from the 4.5 per cent growth in the preceding quarter.


For the rest of the year, the weaker external economic outlook will weigh on the growth of outward-oriented sectors in Singapore, including the electronics and chemicals clusters.

The strong recovery in air travel and international visitor arrivals is expected to continue to benefit aviation- and tourism-related sectors such as air transport and arts, entertainment and recreation, as well as consumer-facing sectors like food and beverage services, said MTI.

The lifting of travel restrictions in Singapore and the region has also boosted the recovery of the professional services sector, the ministry added.


GDP growth in the US is expected to slow significantly, with tighter financial conditions, a reduction in household savings, as well as negative household wealth effects arising from asset market corrections expected to weigh on private consumption. 

Similarly in the Eurozone, higher cost pressures arising from significant energy disruptions due to the war in Ukraine, along with tighter financial conditions, are likely to dampen consumption and industrial production. 

In Asia, China’s growth is projected to pick up from a low base but remain sluggish as its zero-COVID policy is likely to continue to constrain household consumption, said MTI. 

While the financing measures introduced recently will help alleviate the liquidity crunch faced by developers, China's property sector is likely to remain weak in the near term.

GDP growth in the Southeast Asian economies of Malaysia and Indonesia is expected to moderate amid weaker demand for their merchandise exports, although the ongoing recovery in domestic and tourism demand will provide some support.


"At the same time, significant uncertainties and downside risks in the global economy remain," said MTI.

With many advanced economies raising interest rates simultaneously to combat high inflation, the impact of tightening financial conditions on global growth could be larger than expected.

Financial stability risks could intensify if there are disorderly market adjustments to monetary policy tightening in the advanced economies, said MTI. A sharp re-pricing of assets could trigger capital outflows from the region and increase debt servicing burdens, dampening regional economies’ growth outlook.

Further escalations in the Ukraine war and geopolitical tensions among major global powers could worsen supply disruptions, dampen consumer and business confidence, as well as weigh on global trade, added MTI.

"Against this backdrop, the growth of outward-oriented sectors in Singapore is expected to weaken in tandem with the deterioration in external demand conditions," said the ministry.

For instance, the semiconductors segment of the electronics cluster is expected to be negatively affected by the fall in global demand for semiconductors.

At the same time, growth in the wholesale trade, water transport, as well as finance and insurance sectors is expected to be dampened by the slowdown in major external economies.

"On the other hand, the growth prospects of several sectors remain positive. In particular, the continued recovery in air travel and international visitor arrivals will support the expansion of aviation- and tourism-related sectors like air transport, accommodation and arts, entertainment and recreation, as well as other related activities," said MTI. 


By sectors, the manufacturing sector grew at a slower pace of 0.8 per cent year-on-year, compared to the 5.6 per cent growth in the previous quarter.

Growth during the third quarter was supported by output expansions in the transport engineering, general manufacturing and precision engineering clusters. This outweighed output declines in the electronics, chemicals and biomedical manufacturing clusters. 

The construction sector grew by 7.8 per cent year-on-year, accelerating from the 4.8 per cent growth in the previous quarter as both public and public sector construction output rose.

Among the service sectors, which includes wholesale and retail trade, the F&B sector saw a robust 30.5 per cent growth year-on-year from a low base last year, extending the 23.4 per cent expansion in the second quarter.

“Growth of the sector was bolstered by a strong pickup in sales volumes at food caterers, restaurants, and cafes, food courts and other eating places,” said MTI.

Both the wholesale trade and retail trade sectors recorded growths year-on-year in the third quarter. Growth in the wholetrade sector was supported by expansions in the machinery, equipment and supplies, as well as fuels and chemical segments.

Meanwhile, growth in the retail trade sector was driven by an increase in non-motor vehicle sales volume, even as motor vehicle sales volume fell due to a reduction in COE quotas.

All other remaining sectors in the group saw growth, except the accommodation sector which shrank by 1.9 per cent year-on-year, moderating from the 3.4 per cent contraction in the second quarter. 

“The performance of the sector continued to be weighed down by the decline in government demand for quarantine and stay-home-notice dedicated facilities relative to a year ago, even though the recovery in international visitor arrivals provided some support,” said the ministry.

On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 1.1 per cent, reversing the 0.1 per cent contraction in the second quarter.


At a press conference with reporters on Wednesday, Mr Edward Robinson, the deputy managing director of the Monetary Authority of Singapore (MAS), addressed a question on the likelihood of a recession in 2023 and whether MAS sees the need for out-of-cycle monetary moves once more.

In October, MAS tightened monetary policy for the fifth time in a year to help dampen inflation.

Mr Robinson said that MAS’ current monetary policy stance is “appropriate”, and that the cumulative effects of monetary policy tightening since October 2021 “will ensure that price pressures do not become entrenched”.

He added: “The MAS’ next monetary policy review is scheduled for April 2023, when we will carefully examine all factors pertinent to the inflation and growth conjuncture and outlook.

“We will specifically also assess the cumulative impact of the past tightening moves since October 2021 on the economy.”

When asked by CNA what the economic impact of recent developments in US-China ties could be - specifically after US President Joe Biden and Chinese President Xi Jinping met on Nov 14 at the G20 summit in Indonesia - MTI’s permanent secretary Gabriel Lim said it was too soon to tell.

Mr Lim said: "The initial readback seems encouraging, although there are still deeper issues that both sides will have to sort out … but we’ll see.

“I think the global economy, not just Singapore but the rest of the world, will certainly benefit if US-China relations are healthy as they were in the preceding, I would say, sort of 10 to 20, 25 years.

“Conversely, if (this) is unresolved and tensions continue to build, everyone will get hit, not just us. So we certainly hope both sides are able to work out something … going forward.”

Source: CNA/lk(mi)


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