Easing Momentum Expected Amid Global Economic Slowdown
The growth in Singapore’s services sector moderated to 10.9% year-on-year in Q4 2022, compared to 15.9% in Q3, as revealed by the Department of Statistics (Singstat) on February 27. Economists predict further easing in 2023 as global economic conditions weaken.
Growth Trends and Key Drivers
Maybank economist Chua Hak Bin attributed the slowdown to reduced gross domestic product (GDP) growth, with services-producing industries expanding by 4.1% in Q4, down from 5.8% in Q3. Quarter-on-quarter, business receipts rose by 2.9%, slightly up from Q3’s 2.6%.
CIMB economist Song Seng Wun noted that the lifting of Covid-era restrictions and increased international travel contributed to growth in industries such as food and beverage, hospitality, and retail. However, the rebound effect is tapering as these sectors return to pre-pandemic levels.
Chua added that a manufacturing downturn has weighed on trade-related services, including shipping and wholesale trade. Despite this, he expects a moderate increase in services receipts in Q1 2023, aided by China’s reopening.
Industry-Specific Performance
All services industries in the Singstat index saw year-on-year growth in Q4, though transportation and storage were the only sectors to decline quarter-on-quarter. Key highlights include:
Recreation and Personal Services: The largest year-on-year growth, up 36.8%, driven by gaming and attractions, as Covid-19 restrictions were relaxed.
Information and Communications: Strong performance due to increased activities by software developers and IT consultancy firms.
Finance and Insurance, Real Estate, and Professional Services: Maintained double-digit growth rates.
On a quarterly basis, professional services recorded the highest growth at 13.3%, led by legal, head office, and business consultancy activities. Information and communications also rebounded with notable gains after a 2.1% decline in Q3.
Outlook for 2023
Economists anticipate normalised growth for the services sector in the coming quarters, provided the global economy avoids recession. Global labour market stability is seen as a positive factor, with firms continuing to hire.
The easing momentum reflects broader global trends, but Singapore’s service industries remain resilient, supported by recovering demand and strategic economic reopening in key regions like China.
