Singapore narrows 2023 growth forecast to around 1% on weak exports
Singapore's GDP is forecast to expand by 1 per cent to 3 per cent next year as major economies are expected to gradually pick up in the second half of 2024.
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SINGAPORE: The Singapore economy is expected to grow by around 1 per cent in 2023, narrowing from a previous forecast range of 0.5 per cent to 1.5 per cent due to subdued external demand.
The updated forecast, released by the Ministry of Trade and Industry (MTI) on Wednesday (Nov 22), came as third-quarter GDP expanded by 1.1 per cent year on year. This is faster than the advance estimate of 0.7 per cent.
On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 1.4 per cent, accelerating from the 0.1 per cent expansion in the second quarter.
"Taking into account the performance of the Singapore economy in the first three quarters of the year - 0.7 per cent year-on-year - as well as the latest external and domestic developments, the 2023 GDP growth forecast for Singapore is narrowed to around 1.0 per cent, from 0.5 to 1.5 per cent," MTI said.
For 2024, GDP growth is projected to come in at 1 per cent to 3 per cent as major global economies are expected to pick up gradually in the second half of the year.
DBS economist Chua Han Teng said the third quarter growth showed "nascent signs of stabilisation", which potentially marks the start of a gradual recovery.
The bank maintained its 2023 growth forecast at 0.9 per cent, and the 2024 forecast at 2.2 per cent.
THIRD QUARTER GROWTH
Growth in the third quarter was supported by sectors such as construction, retail trade, accommodation, as well as finance and insurance.
The construction sector grew by 6.3 per cent year-on-year, extending the 7.7 per cent expansion in the second quarter, as both public and private sector construction output rose.
The retail trade sector expanded by 2.2 per cent year-on-year, extending the 2.4 per cent growth in the previous quarter. Both motor vehicle and non-motor vehicle sales volumes increased during the quarter.
The accommodation sector posted robust growth of 12.9 per cent year-on-year, extending the 13 per cent growth in the second quarter. Growth of the sector continued to be bolstered by the strong recovery in international visitor arrivals, said MTI.
The real estate sector posted growth of 3.4 per cent year-on-year, slowing from the 12.1 per cent expansion in the second quarter.
Manufacturing in the third quarter shrank by 4.6 per cent year on year, compared with the 7.6 per cent contraction in the previous quarter. All clusters within the sector contracted except for the transport engineering cluster.
"Given subdued external demand, Singapore’s manufacturing and trade-related sectors such as precision engineering and water transport are likely to remain weak for the rest of 2023," said MTI, adding that the ongoing recovery in air travel and tourism is expected to support the growth of sectors such as air transport and accommodation.
"Meanwhile, resilient labour market conditions will continue to lend support to consumer-facing sectors like retail trade and food and beverage services."
DBS' Mr Chua said the manufacturing sector, which contributes about one-fifth of Singapore's GDP, is expected to make a "gradual and fragile recovery" into 2024.
"Our in-house nowcast model estimate shows a further modest growth improvement in (the fourth quarter of 2023). This is in line with forward indications from the slightly better business expectations survey results for the next six months for October 2023 to March 2024."
FORECAST FOR 2024
Looking ahead to 2024, MTI said GDP growth rates in major economies such as the US and Eurozone are projected to slow further in the first half of the year due to continued tight financial conditions, before picking up gradually in the second half.
China’s growth is projected to remain sluggish in 2024 and come in lower than that in 2023, given sustained weakness in its property sector.
"At the same time, domestic consumption (in China) and exports growth are likely to remain lacklustre, in line with weak consumer confidence and sluggish external demand respectively," MTI added.
In Southeast Asia, GDP growth in Malaysia and Thailand is expected to pick up in 2024, supported by an improvement in external demand for electronics and resilient domestic demand.
Nonetheless, MTI noted that significant downside risks remain in the global economy.
Sticky core inflation in advanced economies could induce central banks to maintain current high interest rates for longer, increasing strains to the global financial system.
An escalation or widening of the Israel-Hamas conflict or the war in Ukraine could also lead to renewed supply disruptions and commodity price shocks.
The confluence of these factors could weigh on both business and consumer sentiments along with demand, leading to a slowdown in global growth and trade, MTI said.
Against this backdrop, the ministry added that the growth outlook for Singapore’s manufacturing and trade-related sectors in 2024 is expected to improve in tandem with the turnaround in global electronics demand. In particular, the electronics and precision engineering clusters are expected to benefit from a recovery in demand for semiconductors and semiconductor equipment respectively.
“A growth in the wholesale trade sector is projected to strengthen on the back of an improvement in external demand for electronic components and telecommunications and computers. If global interest rates start to moderate in 2024, the finance and insurance sector is also expected to post a modest recovery,” MTI said.
The continuing recovery in air travel and tourist arrivals will support the growth of aviation- and tourism-related sectors, including air transport and accommodation, although the pace of growth is likely to moderate.
"Likewise consumer-facing sectors such as retail trade and food and beverage services are projected to continue to expand amidst resilient labour market conditions," it added.
