SINGAPORE’S economy grew 1.1 per cent in 2023, revised down marginally from the January advance estimate of 1.2 per cent, data from the Ministry of Trade and Industry (MTI) showed on Thursday (Feb 15). It moderated from the 2022 full-year growth figure of 3.8 per cent.

The downward revision came as fourth-quarter gross domestic product (GDP) growth was revised down to 2.2 per cent year on year, lower than the advance estimate of 2.8 per cent, but still marking an acceleration from the third quarter’s 1 per cent expansion.

On a quarter-on-quarter seasonally adjusted basis, the economy expanded by 1.2 per cent in Q4, picking up slightly from 1 per cent in Q3. This was also down from the advance estimate of 1.7 per cent.

MTI kept its 2024 growth forecast range unchanged at 1 to 3 per cent, noting that the external demand outlook has remained mostly unchanged since its last economic survey in November last year.

Growth in the advanced economies is likely to ease in H1 2024, mainly on continued tight financial conditions, before recovering in line with easing monetary policy as inflationary pressures recede, MTI said. Growth in regional economies should pick up, supported by the turnaround in global electronics demand, it added.

RHB acting group chief economist Barnabas Gan said US+Asean indicators continued to show signs of strength in end-2023, especially in US labour, manufacturing and consumption numbers.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

“Asean trade numbers are also improving, with export momentum significantly accelerating in China,” he said. “Global equities have also rallied in the quarter to date, highlighting the improved investors’ risk appetite.”

He added that China’s decision to cut its reserve requirement ratio will inject one trillion yuan (S$187.3 billion) of additional liquidity into its economy, “which should cushion the downside risks and allow consumption and investment patterns to fuel its growth” in upcoming quarters.

But OCBC chief economist Selena Ling warned that the risk of further escalation in trade tensions remain, “since US presidential candidate (Donald) Trump is touting a 60 per cent tariff on all Chinese imports”.

MTI also highlighted that downside risks remain significant. Escalation of the Israel-Hamas conflict or war in Ukraine could disrupt global supply chains and commodity markets, weighing on global trade and growth.

The lagged effects of monetary tightening could trigger latent vulnerabilities in banking and financial systems, putting stress on regional economies with external financing needs.

And if the global disinflation process is disrupted by cost shocks such as adverse weather conditions, financial conditions could stay tight for longer, weakening economic recovery momentum.

MTI recognises that the recent uptick in inflation could throw the market anticipation of imminent policy pivot into disarray, and central banks also cannot take things for granted, said Ling.

Edward Robinson, Monetary Authority of Singapore (MAS) chief economist, was asked in a media briefing whether, given the expectation that advanced economies will ease monetary policy in H2 2024, Singapore will do the same.

He reiterated that the current policy stance “remains appropriate”, with the next review scheduled for April 2024. The MAS’ core inflation outlook is unchanged, he said, while flagging “continuing uncertainties on both the growth and inflation front”.

For Singapore, growth in the manufacturing and trade-related sectors is expected to pick up gradually.

The domestic electronics cluster is expected to recover in 2024, following the normalisation of inventory levels and an increase in demand for PC, smartphone and automotive chips.

Meanwhile, MTI said the wholesale trade sector’s machinery, equipment and supplies segment will also gain from higher external demand for electronic components as well as telecommunications and computers.

The continued recovery in air travel and tourism demand will also support growth in Singapore’s tourism and aviation-related sectors, including aerospace, air transport and accommodation, as well as consumer-facing sectors such as retail trade and food and beverage (F&B) services. Still, the pace of growth for most of these sectors is expected to moderate from that in 2023.

Maybank analysts Chua Hak Bin and Brian Lee said such consumer-facing sectors will likely moderate with fizzling revenge spending in services, high prices and the strong Singapore dollar, which encourages spending abroad.

Said DBS economist Chua Han Teng: “Growth trends within the diversified services sector are shifting, having cushioned the overall economy in 2023.”

Sectoral performance

On the whole, GDP growth in 2023 was driven mainly by the other services, information and communications and transportation and storage sectors, said MTI Permanent Secretary (Development) Dr Beh Swan Gin at the media briefing.

The goods producing industries – consisting of manufacturing and construction – contracted by 2.9 per cent.

The manufacturing sector shrank by 4.3 per cent, reversing from 2022’s 2.7 per cent growth. All clusters within the sector except for transport engineering recorded output declines.

The services producing industries expanded by 2.3 per cent in 2023, slowing from the 5.1 per cent growth in 2022. This was driven mainly by other services, information and communications, and transportation and storage. 

In the fourth quarter, most sectors grew year on year, with the following exceptions: retail trade (-0.3 per cent), F&B services (-1.5 per cent), professional services (-0.7 per cent), and administrative and support services (-1.7 per cent).

But downgrades were observed across all sectors, compared with flash estimates, noted Maybank’s team.

The finance and insurance sector marked the sharpest growth in Q4, at 5.4 per cent, accelerating from Q3’s 2.5 per cent. It was buoyed by a surge in net fees and commissions amid higher wealth management income.

DBS’ Chua expects financial services growth to be sustained. In addition to supportive base effects, credit demand will improve as global central banks pause monetary tightening, and look to eventually cut interest rates, he said.

The manufacturing sector also grew in Q4 after four consecutive quarters of decline, rising 1.4 per cent year on year, and reversing from the 4.9 per cent contraction the previous quarter. This was due to output increases in the electronics, transport engineering and chemicals clusters.