Singapore’s economy grew 0.4% on a year-on-year basis in the first quarter of 2023, official data showed on Thursday, beating the advanced estimate of 0.1% released last month.
On a quarter-on-quarter, seasonally-adjusted basis, the economy contracted 0.4%, a reversal from the 0.1% growth in the fourth quarter of 2022.
Gabriel Lim, trade ministry permanent secretary, said the external demand outlook for the rest of the year had weakened.
“Apart from the expected slowdown in the advanced economies, the electronics downcycle is likely to be deeper and more prolonged than earlier projected,” Lim told a press conference, Reuters cited.
“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 trade ministry is maintaining its gross domestic product growth forecast at 0.5% to 2.5% this year, with growth likely to come in at around the mid-point of that range.
CNA cited that Singapore has maintained its growth forecast for 2023 at 0.5 per cent to 2.5 per cent, with growth likely to “come in at around the mid-point” of this range, the Ministry of Trade and Industry (MTI) said on Thursday (May 25).
The decision comes alongside data showing the economy growing by 0.4 per cent year-on-year between January and March, weighed down by the manufacturing, wholesale trade and finance and insurance sectors.
This is higher than the advance estimates of 0.1 per cent, but still marks a sharp slowdown from the 2.1 per cent growth in the previous quarter.
On a quarter-on-quarter seasonally adjusted basis, the economy shrank by 0.4 per cent in the first quarter, a reversal from the 0.1 per cent growth in the previous quarter.
WEAKER EXTERNAL DEMAND OUTLOOK
In its assessment of this year’s economic outlook, MTI said the performance of advanced economies, such as the United States and Eurozone, has turned out to be more resilient than expected.
Nonetheless, their growth outlook for the rest of the year remains weak, with growth in 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 earlier expected, driven by a pickup in domestic services consumption following the lifting of its COVID-19 restrictions.
But continued stresses in the country’s property market, as well as weakness in the industrial sector amid subdued external demand conditions, will continue to weigh on the recovery.
Against this backdrop, 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.
Spill overs from China’s services-led recovery are also expected to remain weak given that services activities are less import-intensive than industrial activities.”
At the same time, downside risks in the global economy have risen.
These include 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.
Turning to the domestic outlook, MTI said prospects of the local aviation- and tourism-related sectors remain positive given the ongoing recovery in international air travel and inbound tourism.
However, the outlook for the manufacturing and other trade-related sectors has weakened.
In particular, the manufacturing sector is projected to see a deeper downturn, led by output contractions in the electronics and precision engineering clusters in tandem with weaker global semiconductor demand, 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.
