SINGAPORE’S economy expanded 1.2 per cent year on year in 2023, pulled up by stronger growth in the fourth quarter, advance estimates from the Ministry of Trade and Industry (MTI) showed on Tuesday (Jan 2).

This makes last year’s gross domestic product (GDP) slightly better than the official forecast of “around 1 per cent” that MTI had narrowed to last November, but much lower than the 3.6 per cent growth in 2022.

Fourth quarter GDP growth came in at 2.8 per cent, faster than the revised 1 per cent recorded in Q3 and better than private-sector economists’ median expectations of 1.8 per cent growth, according to a Bloomberg poll.

The better-than-expected print was partly thanks to base effects, as well as a turnaround in the manufacturing sector, which grew 3.2 per cent, noted OCBC chief economist Selena Ling.

But manufacturing’s upturn came after four previous quarters in contraction. For the whole of 2023, the sector contracted 3.6 per cent, dragging down full-year growth.

This was offset by construction, which grew 7.7 per cent, and services, which expanded 2.3 per cent.

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On a seasonally adjusted quarterly basis, the economy grew 1.7 per cent in Q4, extending the previous quarter’s revised 1.3 per cent expansion.

Manufacturing’s growth in Q4 was a turnaround from the 4.7 per cent contraction in the previous quarter. This was on the back of improved output across all clusters except for precision engineering.

“We think electronics and transport engineering were likely the leading growth clusters, given the recovery in international air traffic, shipping and global electronics demand,” said Maybank economists Chua Hak Bin and Brian Lee.

In Q4, construction expanded 9.1 per cent year on year, growing at a faster pace than the previous quarter’s 6.2 per cent growth. This was due to increased output for both the public and private sector, said MTI.

Meanwhile, the services industries grew 2.4 per cent in Q4, a nudge higher than the 2.3 per cent recorded in Q3.

All clusters within the sector recorded growth in Q4, with information and communications, finance and insurance, and professional services recording the biggest expansion at 3.9 per cent year on year. This was also higher than the 2.5 per cent recorded in Q3.

Within the group, information and communications growth was led by the IT and information services segment, while that in the professional services sector was driven mainly by the other professional, scientific and technical services segment.

As for finance and insurance, growth was supported primarily by activities auxiliary to financial services, such as payment processing activities, said MTI.

This was followed by accommodation and food services, real estate, administrative and support services, and other services, which grew 2 per cent on the year in Q4. This was, however, slower than Q3’s 3.9 per cent growth.

Wholesale and retail trade and transportation and storage grew 2.4 per cent in Q4, slightly higher than the 2.3 per cent in the previous quarter.

Economists still expect the Monetary Authority of Singapore to leave monetary policy settings unchanged during the upcoming meeting in January, which is set to take place no later than Jan 29.

But the risks are tilted towards further tightening, rather than easing, said Barclays economist Brian Tan.

“Stickier-than-expected core inflation will likely keep the central bank more concerned about inflation reigniting rather than extinguishing, further discouraging monetary policy easing,” he said.

MTI expects Singapore’s economy to grow by 1 to 3 per cent in 2024.

Prime Minister Lee Hsien Loong had earlier revealed the 1.2 per cent full-year growth figure in his New Year’s Day message on Sunday evening.

In his speech, he warned the external environment will remain challenging – not just in 2024, but for several years. The global economy will continue to be weighed down by geopolitical uncertainties, while climate change will pose major challenges for every country, he noted.