This is down from the previous forecast range of 0.5 to 2.5 per cent, as the Ministry of Trade and Industry said it sees a “weak” external demand outlook for the rest of the year.
SINGAPORE: Singapore has trimmed its growth forecast for 2023 amid expectations for demand from key external economies to remain weak ahead.
The Ministry of Trade and Industry (MTI) said on Friday (Aug 11) that the country’s gross domestic product (GDP) for this year is now expected to come in between 0.5 to 1.5 per cent, narrowing from the previous 0.5 to 2.5 per cent range.
The decision comes alongside data showing the economy growing by 0.5 per cent year-on-year in the second quarter.
This is a notch below the advance estimate of 0.7 per cent, but slightly advancing from the 0.4 per cent growth in the first quarter.
On a quarter-on-quarter seasonally-adjusted basis, Singapore’s economy expanded marginally by 0.1 per cent between April and June. This marked a reversal from a 0.4 per cent contraction in the first quarter but underperforming the advance forecast of 0.3 per cent.
Growth during the second quarter was mainly supported by the transportation and storage, other services and information and communications sectors, said MTI’s permanent secretary for policy Gabriel Lim.
For the first half of the year, Singapore’s GDP growth averaged 0.4 per cent on a year-on-year basis.
“WEAK” EXTERNAL DEMAND FOR REST OF 2023
In its quarterly assessment, MTI said it sees a “weak” external demand outlook for the rest of the year.
Growth in the advanced economies, such as the United States and Eurozone, is expected to weaken in the second half of the year, largely due to the cumulative effects of monetary policy tightening, said Mr Lim.
China is also set to see moderating growth, as the post-pandemic recovery in the country’s services activity slows in tandem with deteriorating consumer confidence, he added.
Apart from the expected slowdown in these key external demand markets, MTI also sees the downturn in the global electronics sector to be “more protracted” than initially thought, with a gradual recovery happening only “towards the end of the year at the earliest”, said Mr Lim.
At the same time, there remain downside risks in the global economy.
These include more persistent-than-expected inflation in the advanced economies which could induce tighter global financial conditions and in turn lead to a sharper pullback in global spending and worsen the ongoing manufacturing downturn.
Escalations in the war in Ukraine and geopolitical tensions among major global powers also add to the risk of renewed supply disruptions, dampen consumer and business confidence, as well as weigh on global trade.
Against this global backdrop, MTI said the growth outlook for Singapore’s manufacturing sector remains weak for the rest of 2023. Manufacturing makes up about one-fifth of the local economy.
Manufacturing output, in particular, is expected to be weighed down largely by output contractions in the electronics and precision engineering clusters amid the global electronics downturn.
In addition, subdued growth in the finance and insurance sector is expected given continued weakness in the external economic environment and restrictive financial conditions.
That said, bright spots remain in other parts of the Singapore economy.
MTI noted that the outlook for aviation- and tourism-related sectors remains positive given the ongoing recovery in international air travel and inbound tourism.
Consumer-facing sectors, such as retail trade and food and beverage services, are expected to continue to expand on the back of resilient labour market conditions and the recovery in inbound tourism, it added.
Another positive factor is the booming revival of the concert industry in Singapore, which has seen prominent artistes such as Coldplay and Taylor Swift choosing Singapore as a tour stop and even playing for multiple days.
These concerts are “a very large … economic (value-added) activity”, said Mr Lim in response to a question from CNA. Beyond ticket and merchandise sales, these concerts will also attract a “significant” number of visitors from the region.
“They purchase an air ticket, hopefully on Singapore Airlines. They will come stay in our hotels, take the opportunity to tour Singapore (so they are) not just coming here for that 2 to 3 hours at a concert but (take) a couple of days (to) spend money in our shops, restaurants and so on,” said Mr Lim.
“So you can imagine the multiplier effect and the spending effect is actually quite large … It’s certainly something that we see as a net positive for our economy.”
Overall, MTI chief economist Yong Yik Wei said Singapore should see positive, although modest, year-on-year growth in the second half of 2023.
On a sequential basis, the ministry does not expect a technical recession to occur for the rest of the year.
“I think we are looking at a very modest recovery profile in the second half of the year and that’s anchored by … inbound tourism and the resilience of the consumer-facing sectors providing some cushion to growth,” said Ms Yong.
“And hopefully, if the electronics downcycle were to bottom out towards the end of the year, that should give a small lift to electronics as well towards the end of the year,” she added.