Singapore maintains 2023 growth forecast amid global economic risks

Singapore‘s Ministry of Trade and Industry (MTI) has announced that it is maintaining its growth forecast for 2023 at 0.5% to 2.5%, with growth expected to be around the mid-point of this range. This comes as the economy experienced a 0.4% year-on-year growth between January and March, primarily due to the manufacturing, wholesale trade, and finance and insurance sectors.

The MTI’s assessment reveals that advanced economies, such as the United States and Eurozone, have demonstrated more resilience than anticipated. However, their growth outlook for the remainder of the year remains weak, with the US and Eurozone economies expected to decelerate more significantly in the second half of the year due to the lagged effects of monetary policy tightening.

On the other hand, China’s economic recovery is likely to be stronger than previously expected, driven by a pickup in domestic services consumption following the lifting of COVID-19 restrictions. Nevertheless, continued stresses in the country’s property market and weakness in the industrial sector amid subdued external demand conditions will continue to weigh on the recovery.

MTI noted that Singapore’s external demand outlook for the rest of the year has weakened. “Apart from the expected slowdown in the advanced economies, the electronics downcycle is likely to be deeper and more prolonged than earlier projected,” it said in its report. Spillovers from China’s services-led recovery are also expected to remain weak given that services activities are less import-intensive than industrial activities.

The report also highlighted that downside risks in the global economy have risen, including recent banking sector stresses that have increased the risk of a sharper-than-expected tightening in global financial conditions, as well as escalations in the Ukraine war and geopolitical tensions among major global powers.

Regarding the domestic outlook, MTI stated that the prospects of the local aviation- and tourism-related sectors remain positive due to the ongoing recovery in international air travel and inbound tourism. However, the outlook for manufacturing and other trade-related sectors has weakened.

The manufacturing sector is projected to experience a deeper downturn, led by output contractions in the electronics and precision engineering clusters, as well as the chemicals cluster due to sluggish demand from China. Growth in the water transport and finance and insurance sectors is also likely to be dampened by the broader slowdown in the global economy, reports Channel News Asia.