SINGAPORE – Singapore warned that downside risks to the global economy remain significant, maintaining its outlook for economic growth to be between 1% and 3% this year.
The Ministry of Trade and Industry (MTI) announced on February 15 that the economic growth rate in 2023 will be 1.1%, slowing from 3.8% growth in 2022. This figure was lower than the official forecast of 1.2% released in January.
The growth rate in the final quarter of last year was 2.2% compared to the same period last year, lower than the initial estimate of 2.8%. This fell short of the 2.5% growth rate expected by analysts compiled by Bloomberg.
MTI said Singapore’s external demand outlook for 2024 remains largely unchanged since its last review in November.
Dr Bae Suan Jin said: “Growth in developed countries is expected to slow in the first half of this year, mainly due to continued tight financial conditions, and then in line with expected monetary policy easing as inflationary pressures recede. “We expect it to recover gradually,” he said. MTI Permanent Secretary for Development attended a press conference after the release of the Singapore Economic Survey 2023.
He added that the regional economy is expected to see faster growth over the next year, due in part to an upturn in global electronics demand.
However, the global economy still faces serious downside risks. These include the conflict between Israel and Hamas, the delayed effects of monetary tightening that could weigh on regional economies, and idiosyncratic cost shocks that could dampen external financing needs and the momentum of economic recovery.
MTI expects growth in Singapore’s manufacturing and trade-related sectors to gradually accelerate in parallel with an upturn in global electronics demand. The electronics and precision engineering industries in particular are expected to recover, driven by a stronger-than-expected recovery in semiconductor sales.
On February 15, Enterprise Singapore also raised its forecast for major export growth in 2024 to 4-6%, compared to 2-4% growth in November.
A continued recovery in air travel and tourism demand will support growth in Singapore’s tourism and aviation-related sectors, including aerospace, air transport and accommodation, as well as consumer-facing sectors such as retail and food and beverage services. MTI said so.
“Yet, the pace of growth in most of these sectors is expected to slow from 2023,” Dr Beh said.
Serena Lin, OCBC’s chief economist, said 2023 marked the third consecutive year of growth, after the pandemic-induced recession in 2020 resulted in a -3.9% growth rate.
He noted that the manufacturing sector grew 1.4% year-on-year in the fourth quarter after contracting for four consecutive quarters.
The construction sector also accelerated further, with healthy construction activities in the public and private sectors, he added.
For the full year 2023, manufacturing still contracted by 4.3%, while in 2022 the growth rate was 2.7%, while construction accelerated.
In the service sector, growth was mixed, with growth in the real estate industry halved and growth in the food service industry slowing.
The retail sales index also slowed from 7.2% growth in 2022 to just 0.6% growth in 2023, with more Singaporeans traveling abroad in the fourth quarter of 2023, offsetting the return of international tourists. Mr. Lin said that the situation turned negative.
Maybank economist Chua Hak Bin said revenge spending in the services sector is disappearing much faster than expected as the strong Singapore dollar and high prices encourage locals to spend overseas.
Dr Chua expects GDP growth to accelerate to 2.2% in 2024 due to the recovery in manufacturing and trade-related services.
DBS economist Chua Han Teng also forecasts growth of 2.2% this year as manufacturing recovers.
DBS’s Chua expects the Singapore Budget, to be announced on February 16, to focus on helping businesses adapt to challenges and seize opportunities.
“Further measures and benefits are likely to be added to help survive high costs, job disruptions and redundancies. Improving capabilities through upskilling, staying on top of new trends and remaining attractive will also be a priority. “It will happen,” he said.
Last year, business unit costs in the manufacturing industry increased by 8.5%, and in 2022, they will increase by 9.9%.
MTI expects economy-wide unit labor costs to continue rising in 2024, albeit at a slower pace than in 2023.
This is because growth in compensation per worker is likely to slow as the tight labor market eases. At the same time, utility, fuel and transportation costs are expected to remain broadly stable, in line with the 2024 global oil price outlook.
Edward Robinson, chief economist at the Monetary Authority of Singapore (MAS), told a news conference that despite “continued uncertainties on growth and inflation,” monetary policy remains appropriate and the central bank remains committed to this. He said he would closely monitor the situation.
Core inflation has slowed from its peak of 5.5% in January 2023, but rose to 3.3% in December.
Robinson also said the real estate market is stabilizing and expects this trend to continue.