Singapore’s economic growth forecast to slow in 2023 to 0.5% to 2.5% amid global uncertainties

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SINGAPORE: Singapore’s economic growth is forecast to slow to 0.5 per cent to 2.5 per cent in 2023 amid global uncertainties, down from the projected 3.5 per cent growth this year, the Ministry of Trade and Industry (MTI) said on Wednesday (Nov 23).

The gross domestic product growth for this year was narrowed from 3 per cent to 4 per cent.

Since August, Singapore’s external demand outlook has softened further due to the weaker outlook for the Eurozone economy amid an energy crunch, as well as for China as it grapples with recurring COVID-19 outbreaks and a property market downturn, said MTI.

For the rest of the year, the weaker external economic outlook will weigh on the growth of outward-oriented sectors in Singapore, including the electronics and chemicals clusters.

The strong recovery in air travel and international visitor arrivals is expected to continue to benefit aviation- and tourism-related sectors such as air transport and arts, entertainment and recreation, as well as consumer-facing sectors like food and beverage services, said MTI.

The lifting of travel restrictions in Singapore and the region has also boosted the recovery of the professional services sector, the ministry added.

In the third quarter of this year, Singapore’s economy expanded by 4.1 per cent year-on-year, easing from the 4.5 per cent growth in the preceding quarter.

On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 1.1 per cent, reversing the 0.1 per cent contraction in the second quarter.

2023 OUTLOOK

In its forecast for 2023, MTI said GDP growth rates in most major economies are expected to moderate further from 2022 levels, with sharp slowdowns projected in the US and Eurozone. 

Global supply disruptions are likely to continue into next year as the war in Ukraine continues, although the extent and frequency of disruptions are expected to ease. 

GDP growth in the US and the Eurozone is projected to slow significantly. 

In Asia, China’s growth is projected to pick up from a low base but remain sluggish as its zero-COVID policy is likely to continue to constrain household consumption, said MTI. 

“At the same time, significant uncertainties and downside risks in the global economy remain,” said MTI.

With many advanced economies raising interest rates simultaneously to combat high inflation, the impact of tightening financial conditions on global growth could be larger than expected.

Financial stability risks could intensify if there are disorderly market adjustments to monetary policy tightening in the advanced economies, said MTI. A sharp re-pricing of assets could trigger capital outflows from the region and increase debt servicing burdens, dampening regional economies’ growth outlook.

Further escalations in the Ukraine war and geopolitical tensions among major global powers could
worsen supply disruptions, dampen consumer and business confidence, as well as weigh on global trade, added MTI.

“Against this backdrop, the growth of outward-oriented sectors in Singapore is expected to weaken in tandem with the deterioration in external demand conditions,” said the ministry.

“On the other hand, the growth prospects of several sectors remain positive. In particular, the continued recovery in air travel and international visitor arrivals will support the expansion of aviation- and tourism-related sectors like air transport, accommodation and arts, entertainment and recreation, as well as other related activities,” it added.

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