The Singapore economy is expected to grow by 1.0% in 2023, according to the Monetary Authority of Singapore’s (MAS) December survey of professional forecasters. The full-year estimate is unchanged from September’s survey and lower than the 1.4% that was forecasted in MAS’s June survey.
This comes after Singapore’s gross domestic product (GDP) expanded by 1.1% y-o-y in the 3Q2023, slightly above the respondents’ median forecast of 1.0% in September. In December, the survey’s 25 economists and analysts are now expecting Singapore’s economy to grow by 1.8% in the 4Q2023.
That said, the respondents now see the manufacturing, finance & insurance, and wholesale & retail trade sectors performing worse than their September outlook.
In the latest survey, respondents now see the manufacturing sector coming in at -4.6% y-o-y for 2023, down from -4.4%. The finance & insurance sector is now expected to grow by 0.2%, down from 0.7%, while the wholesale & retail trade sector will now grow by 0.6% y-o-y in 2023, down from 1.3% as previously expected. Singapore’s non-oil domestic exports (NODX) for the year is expected to perform worse at -12.0%, down from -10.5%.
Based on the mean probability distribution, the Singapore economy is most likely to grow by 1.0% to 1.9% with an average probability of 50%. In the previous survey, the respondents assigned the highest probability to growth outturns of between 0.0% to 0.9%.
Singapore’s CPI-All items inflation – or headline inflation – is expected to come in at 4.8% for the year, up from September’s estimate of 4.7%. MAS core inflation is expected to come in at 4.1% in 2023, unchanged from the previous survey. In 4Q2023, headline and core inflation are expected to come in at 4.0% and 3.1% respectively.
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In 2023, the respondents project that headline inflation will most likely come in between 4.5% and 4.9%, unchanged from the September survey. They also expect Singapore’s core inflation to come in between 4.0% and 4.4%, which is also unchanged from the previous survey.
The unemployment rate in Singapore is expected to come in at 2.0% as at the end of the year.
The Singapore dollar (SGD) in 2023 is estimated to be at 1.348 to the US dollar (USD) as at the end of the year, down from the respondents’ previous estimate of an exchange rate of 1.33.
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The Singapore overnight rate average (SORA) is expected to be at 3.7% by the end of 2023, down from the 3.8% as previously forecasted.
Bank loans are expected to decline by 4.5% by the end of 2023, down from the 2.6% decline as forecasted in the previous survey.
Outlook for 2024
In 2024, Singapore’s GDP is estimated to expand by 2.3%, down from the previous forecast of 2.5%. The respondents foresee the most probable outcome of growth to fall between 2.0% and 2.9%, similar to the previous survey. The average probability assigned to the range is 47%, up from 39% previously.
Headline inflation is forecast to grow by 3.4% in 2024, while core inflation is expected to come in at 3.0%. The respondents assigned the highest probability to the 3.5% to 3.9% range for headline inflation, compared to 3.0% to 3.4% in the September survey. The highest probability was assigned to the 3.0% to 3.4% range for core inflation, compared to previous survey where the highest probabilities were almost equally spread between the probability ranges of 2.0% to 2.4% and 2.5% to 2.9%.
Corporate and financial indicators
Of the 25 respondents, 57.1% of them expect corporate profits to remain stable in 2023 while 28.6% foresee a decline in profitability. The outlook is more buoyant than September’s estimates, with just 16.7% of respondents expecting corporate profits to remain stable while 66.7% of them expecting lower profitability for the year.
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In December, an equal number of respondents (42.9%) foresee higher or declining private residential property prices. In addition, 42.9% of respondents expect corporate bond spreads to widen and an equal number of respondents (28.6%) expect corporate bond spreads to remain stable or narrow.
For 4Q2023, 43% of the respondents expect corporate profits to remain stable while an equal number (29%) anticipate a decline or an increase in corporate profits. At the same time, 57% of respondents anticipate a fall in private residential property prices while 29% foresee stable property prices. Meanwhile, 57% of respondents assessed that SGD corporate bond spreads will remain stable while 29% expect spreads to narrow.
In 2024, 57% of respondents anticipate higher corporate profitability, compared to September’s survey where only 33.3% of respondents expected to see higher corporate profits. Meanwhile, an equal proportion of respondents (43%) foresee higher or declining private residential property prices in 2024. Another 42.9% of respondents expect corporate bond spreads to widen and an equal number of respondents (28.6%) expect corporate bond spreads to remain stable or narrow.
Drivers of financial and lending market conditions
In December, respondents cited tighter global financial conditions, elevated inflation and rising geopolitical tensions as the main factors that could potentially weigh on financial market and lending conditions in Singapore.
At the same time, the respondents note that less restrictive global financial conditions (including rate cuts by major central banks), as well as spillovers from China as possible upside drivers of domestic financial market and lending conditions as upside drivers for Singapore’s financial market and lending conditions.
Spillovers from a slowdown in external growth became the most cited downside risk (by 81% respondents) to the Singapore economy. It was also ranked as the top downside risk among the respondents.
In addition, respondents flagged geopolitical tensions, inflationary pressures and spillovers from weaker growth in China as risks to the domestic growth outlook.
On the other hand, better-than-expected external growth was the most frequently cited upside risk to Singapore’s outlook, identified by 60% of respondents. Respondents also flagged upside risks from the tech cycle recovery and more robust growth in China, with the former being ranked as the top upside risk.
Singapore’s monetary policy
None of the respondents expect the MAS to make changes to the slope, width and level of the Singapore dollar nominal effective exchange rate (S$NEER) policy band in the upcoming January 2024 review.
However, 13% of respondents foresee a reduction in the slope of the S$NEER policy band in April 2024, while 22% of respondents foresee the same happening in July 2024. For the October 2024 review, 18% of respondents anticipate a reduction in the slope of the S$NEER policy band.
