25-5-2023 (Singapore) The Ministry of Trade and Industry (MTI) announced on Thursday (May 25) that Singapore is maintaining its growth forecast for 2023 at 0.5 per cent to 2.5 per cent, with growth expected to fall around the mid-point of this range.
This decision comes alongside the release of data showing that the economy grew by 0.4 per cent year-on-year between January and March. While this figure is higher than the initial estimates of 0.1 per cent, it still reflects a significant slowdown compared to the 2.1 per cent growth in the previous quarter.
MTI’s permanent secretary for policy, Gabriel Lim, attributed the slower growth in the first quarter to contractions in the manufacturing, wholesale trade, and finance and insurance sectors. These contractions were influenced by weaknesses in the global economy and the downturn in the electronics industry.
On a quarter-on-quarter seasonally adjusted basis, the economy contracted by 0.4 per cent in the first quarter, reversing the 0.1 per cent growth in the previous quarter.
However, MTI does not anticipate Singapore entering a technical recession, according to the ministry’s chief economist, Yong Yik Wei. A technical recession is defined as two consecutive quarter-on-quarter contractions.
While the first half of the year may experience “fairly flattish or very low” growth, the economy is expected to gradually recover later in the year, primarily driven by the services sector, stated Ms Yong.
She added, “Given the downside risks and the weakening outlook, we cannot rule out the possibility that there could be some quarters of negative quarter-on-quarter growth this year, but again, that’s not our baseline.”
MTI’s assessment of the economic outlook highlighted weaker external demand, particularly in advanced economies such as the United States and Eurozone. Although the performance of these economies has been more resilient than anticipated since the last quarterly update in February, their growth is expected to decelerate 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 predicted to be stronger than previously expected, driven by increased domestic services consumption following the easing of COVID-19 restrictions. However, challenges in the country’s property market and weakness in the industrial sector due to subdued external demand conditions will continue to impede the recovery.
