Economists downgrade 2023 growth forecast to 1.4%, manufacturing set to shrink: survey
Sharon See
PRIVATE-SECTOR economists downgraded their full-year economic growth forecast for Singapore to 1.4 per cent this year in a quarterly survey, following a brief uptick in the previous edition.
Gross domestic product (GDP) is now expected to be weighed down by a contraction in the manufacturing sector, as well as a deeper slump in non-oil domestic exports (NODX), the survey of professional forecasters showed on Wednesday (Jun 14).
However, compared with the previous survey, the outlook for the construction as well as accommodation and food services sectors improved.
The survey, conducted by the Monetary Authority of Singapore (MAS), was sent to 26 analysts on May 25, with a response rate of 92.3 per cent. The results do not represent MAS’ views.
In the previous survey, GDP was expected to grow 1.9 per cent in 2023, with manufacturing flatlining.
DBS economist Chua Han Teng said: “We think the weaker 2023 outlook is due to the soft global demand facing Singapore’s externally oriented economy, as advanced economies are still contending with high interest rates, while the post-pandemic recovery is bumpy in China.”
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Maybank senior economist Chua Hak Bin added that economists have downgraded their outlook on the back of the weak first quarter and higher risk of a technical recession.
Growth in the first quarter missed the mark at 0.4 per cent, nearly a percentage point below respondents’ median forecast of 1.3 per cent in the previous survey. They are now expecting the economy to grow 1.5 per cent in Q2.
But several economists told The Business Times that their full-year outlook is gloomier than the consensus forecast of 1.4 per cent. Maybank is expecting growth at 0.8 per cent, and UOB, at 0.7 per cent.
Said UOB senior economist Alvin Liew: “It is notable that both of Singapore’s non-oil domestic exports and manufacturing output have already contracted in year-on-year terms for seven months since October 2022, and even longer for electronics NODX.”
While services could fare better in 2023, Liew said the extent of the sector’s improvement may be curtailed by the risk factors of global growth weakness, banking sector issues and evolving geopolitics.
Inflation outlook remained the same as in the previous survey, with the median forecast for full-year headline inflation at 5 per cent and that for core inflation, which excludes accommodation and private transport, at 4.1 per cent.
Overall unemployment rate is expected to hit 2.1 per cent this year, a notch below 2.2 per cent in the previous survey.
For Q2, respondents expect headline inflation to come in at 5.2 per cent and core inflation, 4.6 per cent.
None of the respondents expect any change to monetary policy in the October review; a minority of them expect some tweaks in the April 2024 review.
Inflation is projected to ease by 2024, with headline at 3.3 per cent and core at 3 per cent.
Respondents appear to be more confident that headline inflation will fall within 3 per cent to 3.4 per cent by 2024.
As for risks to Singapore’s economic outlook, the external growth slowdown has now emerged as the most cited downside risk, identified by 61 per cent of respondents. Close to 28 per cent of them consider this the top downside risk.
This was followed by inflationary pressures and an escalation in geopolitical tensions, both of which were the most cited risks in the previous survey.
The main upside risks – China’s reopening, better-than-expected external growth and the tech-cycle recovery – remained unchanged from the previous survey.
More robust growth in China, underpinned by economic reopening and macroeconomic policy easing, was the most cited upside risk, with 70.6 per cent of respondents identifying it as such.
Nearly 30 per cent of respondents named it the top upside risk, but this was lower than the 56.3 per cent who said it was so in the previous survey.
“Decelerating” economic indicators from April and May that point to a disappointing pace of reopening in China, as well as the weak external demand, have contributed to greater caution over Singapore’s near-term growth prospects, said OCBC chief economist Selena Ling, describing it as a “glass half empty and half full story”.
“Barring an improvement in the global demand cycle and a stronger resumption of China’s growth recovery, there are two-sided risks to Singapore’s growth prospects for the rest of this year,” she said.
“One would determine the stabilisation of the manufacturing and electronics industries, the other would drive the return of Chinese visitors and uplift the hospitality-related sectors.”
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