SINGAPORE — Singapore's economy is expected to see slower growth of 0.5 to 2.5 per cent in 2023, compared to a forecasted 3.5 per cent growth in 2022 — narrower than a previous estimate of between 3 and 4 per cent — said the Ministry of Trade and Industry (MTI) on Wednesday (Nov 23).

In its quarterly Economic Survey of Singapore, MTI added that on a quarterly basis, the country's economy grew at a slower pace of 4.1 per cent year-on-year in the third quarter, down from 4.5 per cent in previous 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.

Growth in the third quarter was bolstered by the food and beverage services sector, which saw a robust growth of 30.5 per cent year-on-year following a low base from 2021, which extends on the 23.4 per cent expansion in the second quarter. 

"Growth of the sector was bolstered by a strong pickup in sales volumes at food caterers, restaurants and cafes, food courts and other eating places," said MTI.

The real estate sector also grew by 11.7 per cent year-on-year, extending on the 11.1 per cent growth in the preceding quarter. 

"Growth was largely supported by the private residential property segment, as well as the commercial office and industrial space segments," it added.

The construction sector also grew by 7.8 per cent year-on-year, accelerating from the 4.8 per cent growth in the previous quarter, as both public and private sector construction output rose.

On the other hand, the manufacturing sector expanded at a slower pace of 0.8 per cent year-on-year, compared to the 5.6 per cent growth in the preceding quarter.

Growth during the quarter was supported by output expansions in the transport engineering, general manufacturing and precision engineering clusters, which outweighed output declines in the electronics, chemicals and biomedical manufacturing clusters.

The information and communications sector also expanded by 6.2 per cent year-on-year, moderating from the 9.8 per cent growth in the previous quarter, while growth in the finance and insurance sector slowed to 0.4 per cent year-on-year, from 2.4 per cent in the preceding quarter.

ECONOMIC OUTLOOK 

The gross domestic product (GDP) growth forecast for Singapore in 2022 was narrowed to around 3.5 per cent, from a previous estimate of between 3 and 4 per cent. 

The new figure takes into account the latest external and domestic economic developments. 

Since MTI's previous economic survey in 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 continues to grapple with recurring Covid-19 outbreaks and a property market downturn. 

For the rest of 2022, the weaker economic outlook will weigh on the growth of outward-oriented sectors in Singapore, including the electronics and chemical clusters. 

Meanwhile, 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.

"The lifting of travel restrictions in Singapore and the region has also boosted the recovery of the professional services sector," said MTI. 

Looking forward, MTI said that the Singapore economy is expected to grow by 0.5 to 2.5 per cent in 2023. 

In 2023, GDP growth rates for major economies around the world are expected to moderate further from 2022 levels, with sharp slowdowns expected in the United States and Eurozone. 

"Meanwhile, global supply disruptions are likely to continue into 2023 as the war in Ukraine drags on, even though the extent and frequency of disruptions is expected to ease," said MTI. 

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, while its property sector is likely to remain weak in the near term despite financing measures introduced recently to help to alleviate the liquidity crunch faced by developers. 

For Southeast Asia, GDP growth in the economies of Malaysia and Indonesia is expected to moderate amid weaker demand for their merchandise exports, although the ongoing recovery in domestic and tourism demand will provide some support, said MTI. 

There are also significant uncertainties and downside risks in the global economy that remain.

For instance, 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, said MTI.

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

Thus, against this backdrop, the growth of outward-oriented sectors in Singapore is expected to weaken along with the deterioration in external demand conditions.

Notwithstanding, the growth prospects of several sectors remain positive, said MTI.

"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."