Singapore has trimmed its growth forecast for 2023 amid expectations for demand from key external economies to remain weak.

The Ministry of Trade and Industry (MTI) said on Friday (Aug 11) that the country’s gross domestic product (GDP) for this year is now expected to come in between 0.5 to 1.5 per cent, narrowing from the previous 0.5 to 2.5 per cent range.

The decision comes alongside data showing the economy growing by 0.5 per cent year-on-year in the second quarter.

This is a notch below the advance estimate of 0.7 per cent, but slightly advancing from the 0.4 per cent growth in the first quarter.

On a quarter-on-quarter seasonally-adjusted basis, Singapore’s economy expanded marginally by 0.1 per cent between April and June. This marked a reversal from a 0.4 per cent contraction in the first quarter but underperforming the advance forecast of 0.3 per cent.

For the first half of the year, Singapore’s GDP growth averaged 0.4 per cent on a year-on-year basis.

'WEAK' EXTERNAL DEMAND FOR REST OF 2023

In its quarterly assessment, MTI said it sees a “weak” external demand outlook for the rest of the year.

Apart from the expected slowdown in Singapore’s key external demand markets, the downturn in the global electronics sector will also likely be protracted with a gradual recovery happening only “towards the end of the year at the earliest”, it said.

At the same time, there remain downside risks in the global economy.

These include more persistent-than-expected inflation in the advanced economies which could induce tighter global financial conditions and in turn lead to a sharper pullback in global spending and worsen the ongoing manufacturing downturn.

Escalations in the war in Ukraine and geopolitical tensions among major global powers also add to the risk of renewed supply disruptions, dampen consumer and business confidence, as well as weigh on global trade.

Against this global backdrop, MTI said the growth outlook for Singapore’s manufacturing sector remains weak for the rest of 2023. Manufacturing makes up about one-fifth of the local economy.

Manufacturing output, in particular, is expected to be weighed down largely by output contractions in the electronics and precision engineering clusters amid the global electronics downturn.

In addition, subdued growth in the finance and insurance sector is expected given continued weakness in the external economic environment and restrictive financial conditions.

That said, bright spots remain in other parts of the Singapore economy.

MTI noted that the outlook for aviation- and tourism-related sectors remains positive given the ongoing recovery in international air travel and inbound tourism.

Consumer-facing sectors, such as retail trade and food and beverage services, are expected to continue to expand on the back of resilient labour market conditions and the recovery in inbound tourism, it added.

“Taking into account the performance of the Singapore economy in the first half of 2023, as well as the latest global and domestic economic developments, MTI has narrowed the GDP growth forecast for 2023 to 0.5 to 1.5 per cent, from 0.5 to 2.5 per cent," the ministry said. CAN

Source:
courtesy of TODAY

by TANG SEE KIT

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