IMF sees Singapore growth slowing to 1.5% in 2023 as global headwinds offset China boost
THE International Monetary Fund (IMF) has lowered its 2023 growth forecasts for Singapore, along with those of its Asean neighbours, saying slowing global growth will outweigh the positive impact from China’s economic reopening.
Its chief economist Pierre-Olivier Gourinchas said Singapore’s economy will grow by 1.5 per cent this year, slower than the 3.7 per cent growth achieved in 2022.
Speaking on Tuesday (Jan 31) at a media conference held here to mark the release of the IMF’s latest World Economic Outlook, he said the forecast was lowered from a projection of 2.3 per cent made in October, in line with slower growth at most of Singapore’s major trading partners.
The IMF forecast falls within the Ministry of Trade and Industry’s prediction of a 0.5 per cent to 2.5 per cent growth this year for Singapore.
The IMF slightly raised its 2023 forecast for global growth to 2.9 per cent from the 2.7 per cent it projected in October, citing resilient consumers and the reopening of China’s economy for its more optimistic outlook.
But while China’s economic growth will rebound to 5.2 per cent this year from just 3 per cent in 2022, other major trading partners of Singapore, such as the United States and Europe, will suffer slowing growth.
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The US economy will grow at 1.4 per cent this year, down from 2 per cent in 2022. The euro area’s growth will come at 0.7 per cent, sliding from 3.5 per cent a year earlier, while the British economy will shrink by 0.6 per cent.
Dr Gourinchas said: “What is really important for Singapore, and it is true for many other Asian economies, is the openness to trade. This is an economy that is going to be very influenced by what is happening in terms of global activity.”
He said Singapore will also experience elevated inflation in 2023, partly because of the hike in the goods and services tax, which will prompt the Monetary Authority of Singapore to keep financial conditions tight for longer.
According to the IMF, the Asean-5 – which comprises Indonesia, Malaysia, Philippines, Singapore and Thailand – will grow by 4.3 per cent. That compares with the region’s 5.2 per cent growth in 2022 and 3.8 per cent in 2021.
Dr Gourinchas said that while China’s economic rebound this year will help the region, Asean’s growth forecast was downgraded from an earlier estimate of 4.5 per cent because of slower growth in the other major trading partners.
While the IMF believes that growing trade tensions between the US and China will weigh down global growth in the coming years, Singapore and other Asean nations might actually benefit.
Dr Gourinchas said: “A number of businesses are rethinking where they might decide to locate their activities, in the context of what we call fragmentation risks.
“And that could be actually a benefit to a place like Singapore going forward, as it could be an attractive place for foreign investors and the location of activity compared with some other destinations.” THE STRAITS TIMES
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