Singapore 2023 GDP growth narrows to 1%; Q3 growth at 1.1%
SINGAPORE’S full-year economic growth is expected to come in at around 1 per cent, the Ministry of Trade and Industry (MTI) said on Wednesday (Nov 22) morning.
The growth outlook hits the midpoint of the gross domestic product (GDP) forecast range that MTI had earlier expected. GDP is expected to grow 1 per cent to 3 per cent in 2024.
In the third quarter of this year, the economy expanded by 1.1 per cent year on year, faster than the 0.5 per cent clocked in Q2.
Sequentially, the economy grew 1.4 per cent in Q3, improving from the previous quarter’s 0.1 per cent quarter-on-quarter growth.
MTI’s full-year projection takes into account the economy’s performance in the first three quarters of the year as well as external and domestic developments, Permanent Secretary Gabriel Lim told reporters at a briefing.
He noted that the US economy has performed better than expected since his last briefing in August, but that growth in the US and eurozone is expected to moderate due to the cumulative effects of monetary policy tightening.
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Likewise, China’s growth is likely to slow further from weaknesses in its property sector, domestic consumption and subdued external demand. Global electronics demand also remains sluggish from elevated inventory levels.
“Given subdued external demand, Singapore’s manufacturing and trade-related sectors such as precision engineering and water transport are likely to remain weak for the rest of 2023,” said Lim.
He expects the ongoing recovery in air travel and inbound tourism to support the growth of sectors such as air transport and accommodation, while “resilient labour market conditions will continue to lend support to consumer-facing sectors” such as retail trade and food and beverage services.
MTI’s outlook for 2024 is similar, he said, with growth in the US and eurozone to slow before picking up in the second half, while China’s growth is expected to ease.
“On the other hand, as the post-pandemic boost in demand for services dissipates, there could be a rebalancing of demand towards goods in the year ahead,” he said.
This could mean a “normalisation” of inventory levels that would support a turnaround in global manufacturing activity, including electronics.
However, significant downside risks in the global economy remain, MTI cautioned. Interest rates could remain elevated with sticky core inflation, and an escalation in the Israel-Hamas conflict or war in Ukraine could lead to renewed supply disruptions and commodity price shocks.
“The confluence of these factors could weigh on both business and consumer sentiments along with demand, leading to a slowdown in global growth and trade,” said Lim.
ANZ head of Asia research Khoon Goh noted that compared with advance estimates, Singapore’s final Q3 print was revised by a larger-than-expected magnitude.
As the advance estimate was based on data for the first two months of the quarter, the upward revision indicates an increased pickup in momentum in the month of September, he said, with the “robust” industrial production figures an example of that.
“Looking at my favourite real-time indicator for activity – electricity demand – there has been a noticeable increase in the year-on-year growth over October and November to date.
“It could just be that everyone is turning on their air-con given how hot the weather is. But if the increase in electricity demand is indicative of broader activity, it suggests we could see a further rise in GDP growth in Q4.”
He is expecting GDP to grow 1.2 per cent in 2023, and 2.7 per cent in 2024.
Sectoral breakdown
All sectors other than the manufacturing sector registered growth in Q3.
The manufacturing sector shrank 4.6 per cent year on year in Q3, easing from the 7.6 per cent contraction in the previous quarter.
The construction sector expanded 6.3 per cent year on year, compared with Q2’s 7.7 per cent growth.
On the whole, the goods-producing industries shrank 3.1 per cent on the year in Q3, compared with the 5.6 per cent contraction in the previous quarter.
Meanwhile, the services producing industries grew 2.3 per cent year on year, slightly slower than the previous quarter’s 2.8 per cent growth.
The finance and insurance industry sector had the best improvement, swinging to a growth of 1.5 per cent on the year, from a 1.1 per cent contraction previously.
This was followed by wholesale trade with a 1.2 per cent year-on-year growth, up from 0.2 per cent previously.
The real estate sector saw the largest slowdown in growth, which eased to 3.4 per cent year on year, from 12.1 per cent in Q2.
Transportation and storage was next, with a 1.1 per cent expansion on the year, down from 5.7 per cent in the previous quarter.
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