Singapore: 2023 GDP forecast remains at 0.7% – UOB

Senior Economist at UOB Group Alvin Liew comments on the recently published GDP figures in Singapore.

Key Takeaways

“The preliminary estimate of Singapore’s 4Q GDP was in line with market’s expectation at 0.2% q/q SA, 2.2% y/y expansion (versus Bloomberg est +0.2% q/q, 2.1% y/y, UOB est -0.2% q/q, 1.7% y/y), while 3Q’s GDP growth was slightly revised higher to 4.2% y/y (from 4.1% previously).”

“Even as manufacturing sector staged a surprise +1.8% q/q rebound in 4Q, it was still the main drag on the overall GDP as it contracted by 3.0% y/y (the first y/y fall since 2Q 2020) offsetting the y/y gains in services (-0.4% q/q, +4.1% y/y) and construction activity (+0.4% q/q, +10.4% y/y).”

“SG GDP Outlook: Our 2023 outlook is largely premised on broad moderation in external economies this year, and we project the US and European economies (which are key end markets for Singapore) to enter a recession this year amidst aggressive monetary policy tightening stance among these advanced economies. This will directly impact the manufacturing and external-oriented services sectors. We expect manufacturing sector to contract by 5.4% in 2023 (from +2.6% for 2022). Upside growth factors could be attributed to the continued recovery in leisure and business air travel and inbound tourism, which will benefit many in-person services sectors, and the impact of China’s reopening from 8 Jan is likely to be positive for these sectors although it is difficult to quantify at this juncture. With the faltering manufacturing outlook and barring external events (such as escalating war in Europe and a deadlier variant of COVID-19), we keep our modest 2023 GDP growth forecast of 0.7% (closer to the lower end of the official forecast range of 0.5-2.5%).