Singapore’s Economy Faces Challenges, with Weak External Demand Impacting Growth Outlook
Singapore’s Ministry of Trade and Industry (MTI) has revised the country’s full-year GDP growth forecast for 2023, narrowing it to a range of 0.5% to 1.5%, down from the previous forecast of 0.5% to 2.5%. This adjustment comes in light of continued weakness in external demand, particularly from China and the global manufacturing sector.
In the second quarter, Singapore’s economy grew by just 0.5% year-on-year, slightly below the initial estimate of 0.7%. While this marks an improvement from Q1’s 0.4% growth, it was still below the 0.8% growth predicted by economists. On a seasonally adjusted quarterly basis, the economy expanded marginally by 0.1%, compared to the 0.3% advance estimate. This prevented the country from slipping into a technical recession, which is defined as two consecutive quarters of contraction.
MTI has identified several factors contributing to the revised forecast, including prolonged weakness in the manufacturing sector and a slowdown in China’s economy. Despite these challenges, MTI remains cautiously optimistic about modest growth in the second half of the year, driven by inbound tourism and resilience in consumer-facing sectors. Additionally, a potential rebound in the electronics sector towards the end of the year could offer a small lift to overall growth.
While some economists believe growth momentum will improve in the second half, the risks of weaker-than-expected global demand, inflation, and geopolitical tensions continue to cloud the outlook. The services sector showed some resilience, with growth in finance and insurance, though it was the worst-performing segment, contracting 1.7% year-on-year.
The manufacturing sector, particularly electronics and precision engineering, is expected to continue facing challenges due to the ongoing global downturn in electronics. However, aviation, tourism, and consumer-facing sectors are expected to perform better due to the continued recovery in air travel and tourism.
