Singapore’s economy grew by 0.5% year-on-year in the second quarter of 2023, according to the Ministry of Trade and Industry (MTI) on Friday. This was lower than the advance estimate of 0.7% and the median forecast of 0.6% by economists polled by Reuters.
On a quarter-on-quarter seasonally adjusted basis, the economy expanded marginally by 0.1%, reversing from a 0.4% contraction in the previous quarter. However, this was also below the advance estimate of 0.3% and the median forecast of 0.2%.
The MTI attributed the slower-than-expected growth to the weak performance of the manufacturing sector, which contracted by 7.3% year-on-year in Q2, worse than the 5.4% decline in Q1. The manufacturing sector was dragged down by the global electronics downturn, which affected the output of the electronics and precision engineering clusters.
Singapore narrows 2023 growth forecast range to 0.5-1.5%
In light of the Q2 results and the latest global and domestic developments, the MTI narrowed its growth forecast range for 2023 to 0.5-1.5%, from the previous range of 0.5-2.5%. This implies that the economy will grow at a slower pace than the 1.8% recorded in 2022.
The MTI said that it expects the external demand outlook for Singapore to remain weak for the rest of the year, as key markets such as China, the US, and Europe are expected to slow down amid trade tensions, geopolitical risks, and inflationary pressures.
The MTI also said that the global electronics downturn is likely to be protracted, with a gradual recovery expected only towards the end of the year at the earliest. This will weigh on Singapore’s manufacturing output, especially in the electronics and precision engineering clusters.
In addition, the MTI said that the finance and insurance sector is expected to grow at a subdued pace, given the continued weakness in the external economic environment and tight financial conditions.
Singapore faces downside risks in the global economy
The MTI warned that there are downside risks in the global economy that could further dampen Singapore’s growth prospects. These include:
- More persistent-than-expected inflation in advanced economies, which could induce tighter global financial conditions and lead to a larger pullback in global spending.
- Escalations in the war in Ukraine and geopolitical tensions among major global powers, which could lead to renewed supply disruptions, dampen consumer and business confidence, and weigh on global trade.
- A resurgence of COVID-19 cases and variants, which could disrupt economic activity and mobility in some countries and regions.
The MTI said that it will continue to monitor these developments closely and update its growth forecast as necessary.