Economists barely change 2023 forecasts for Singapore’s growth, inflation: survey
Elysia Tan
PRIVATE-sector economists barely changed their overall 2023 estimates for Singapore in a quarterly survey on Wednesday (Mar 8), with a full-year growth forecast of 1.9 per cent, up marginally from 1.8 per cent in the previous survey.
Their core inflation forecast edged up to 4.1 per cent from 4 per cent before, while their headline inflation forecast slipped to 5 per cent, from 5.2 per cent before.
The survey, published by the Monetary Authority of Singapore (MAS), was sent to 26 professional forecasters on Feb 13. It garnered 21 responses, reflecting their views and not MAS’.
The updated expectations remain within official forecast ranges for growth – between 0.5 and 2.5 per cent – and core inflation, between 3.5 and 4.5 per cent.
The new headline inflation projection remains below MAS’ estimate of 5.5 to 6.5 per cent.
The slight improvement in gross domestic product (GDP) reflects the Ministry of Trade and Industry’s comment in its Q4 2022 GDP report that “Singapore’s external demand outlook has improved slightly”, noted UOB senior economist Alvin Liew.
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OCBC chief economist Selena Ling said that market optimism has grown over the last two months, mainly due to healthier economic data – such as the US’ payroll and manufacturing figures and eurozone’s avoidance of a Q4 2022 contraction – coupled with China’s reopening hopes.
This has led to “pivoting to a soft landing scenario”, she added.
Behind the similar forecasts for overall GDP growth were some specific differences in outlook. The services sector will likely lead improvement as manufacturing lags, economists said.
Non-oil domestic exports (NODX) are now expected to contract more sharply. Growth for the key manufacturing sector is expected to be flat, compared with an earlier forecast of 0.3 per cent. Estimates also fell for construction, and the finance and insurance sector.
But they rose for accommodation and food services, as well as wholesale and retail trade.
On inflation, Ling expects it to dampen going forward, due to high base effects, global growth and a slowdown in demand, accompanied by the “cumulative effects of monetary policy tightening over the past 12 to 18 months”.
In Q1 2023, GDP growth is expected to be 1.3 per cent, down from the preceding quarter’s 2.1 per cent growth and lower than the full-year projection. Inflation for the quarter is predicted to remain elevated at 6.5 per cent for headline inflation, and 5.5 per cent for core inflation.
However, most survey respondents do not expect MAS to tighten policy further at its meetings this year, after it recentred the Singapore dollar nominal effective exchange rate (S$NEER) policy band upwards at its last meeting in October 2022.
For the upcoming April meeting, less than a quarter (23.8 per cent) expect the S$NEER slope to be steepened, down from a third in the last survey. The same proportion expect the level at which the policy band is centred to be raised, up from one in nine before.
For October, most economists surveyed expect unchanged monetary policy. Only one respondent predicts a flattening of the S$NEER’s slope.
Overtaking global growth slowdown in the latest survey, the most-cited downside risks to Singapore’s growth outlook were worsening geopolitical tensions and inflationary pressures. Each was named by 56.3 per cent of respondents, more than in the previous poll.
This “reflects the headlines of recent times, where China-US tensions is again in the spotlight and inflation (especially core) remains elevated in many economies, including Singapore”, said Liew.
But global growth slowdown was ranked the top risk by the most respondents, at 31.3 per cent. Half of the respondents named it as a potential risk.
Worsening geopolitical tensions were indicated as the top risk by 18.8 per cent, and inflationary pressures by 12.5 per cent.
For factors that could result in higher-than-expected growth, more robust growth in China – due to macroeconomic policy easing and economic reopening – remained the most-cited factor. It was named by 87.5 per cent, and ranked the top upside risk by 56.3 per cent.
But “it appears that forecasters expect the benefit from China’s reopening to be channelled towards the tourism sector, and will not be sufficient to offset the slowdown in export demand from other major trade partners”, Moody’s Analytics economist Denise Cheok said.
Other upside risks were better-than-expected external economic growth and a faster recovery in the tech cycle. Cheok highlighted that the latter was not mentioned in the previous survey.
“The potential for AI (artificial intelligence) products such as ChatGPT to drive growth in the tech sector appears to be gaining traction, and providing some optimism to the gloomy outlook for the industry,” she said.
For 2024, economists forecast GDP growth to pick up to 2.5 per cent. Headline inflation is expected to ease to 3.1 per cent, and core inflation to 2.9 per cent.
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