With better visibility that external demand will remain weak towards the end of the year, Singapore has narrowed its 2023 GDP growth projection range to 0.5 to 1.5%, from the earlier 0.5 to 2.5%.
"Apart from the expected slowdown in Singapore’s key final demand markets, the global electronics downturn is also likely to be protracted, with a gradual recovery expected towards the end of the year at the earliest," says Gabriel Lim, MTI's permanent secretary.
The possibility of the lowered projection was already flagged earlier by the Ministry of Trade and Industry (MTI), which on Aug 11 announced that GDP for the 2Q was up 0.5% y-o-y, just a tad better than 0.4% growth eked out in the previous quarter.
On a q-o-q seasonally-adjusted basis, the economy expanded marginally by 0.1%, a reversal from the 0.4% contraction in the first quarter of 2023.
With external demand, especially in electronics remaining weak, the key manufacturing sector was down 7.3% y-o-y, worse than the 5.4% contraction reported in the previous quarter.
Thanks to both public and private projects, the construction sector managed to grow 6.8% y-o-y, similar to 6.9% reported in the preceding quarter.
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Meanwhile, the broader services sector continues to grow in 2Q with the post-pandemic recovery. However, there's some moderation taking place.
The real estate sector stands out, with a growth of 12% y-o-y, accelerating from the 7% chalked up in the previous quarter. "Growth of the sector was supported by the private residential property segment, as well as the commercial office and industrial space segments," says MTI.
MTI notes that despite earlier resilience, the US and the Eurozone economies are likely to weaken in the second half of the year, as rates are being held higher for longer, thereby weighing on costs and consumption.
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MTI also notes that China’s GDP growth is expected to moderate in the second half of the year.
The post-pandemic recovery in its services sector, which has been driving growth, is seen to slow in tandem with deteriorating consumer confidence.
"Sustained weakness in its property sector, alongside subdued external demand, will also continue to weigh on its growth," warns MTI.
Meanwhile, regional economies such as Malaysia, Indonesia and Thailand are projected to remain resilient in the second half of the year on account of the continued recovery in domestic and tourism demand.
Overall, MTI’s assessment is that Singapore’s external demand outlook for the rest of the year remains weak.
