Singapore Says Economy Will Expand up to 2.5% in 2023 as Demand Outlook Improves

Singapore's economy expanded by 3.6 percent in 2022, data released by the Ministry of Trade and Industry (MTI) on Monday showed. Despite the lower than expected annual growth, the government has maintained the earlier projection of growth in the current year.

Singapore economy expands by 1.8 per cent in Quarter 1
The skyline of the central business district in Singapore Reuters

Though less than expected, the expansion last year was driven by the wholesale trade, manufacturing and other services sectors. According to the Business Times, January's advance estimate had suggested the economy would expand 3.8 percent in 2022.

Manufacturing and Services

The manufacturing sector expanded only just 2.5 percent in 2022, compared with 13.3 percent in 2021. While the construction sector expanded 6.7 percent, the services industries grew 4.8 percent.

MTI said the southeast Asian economy is expected to grow in a range of 0.5 percent to 2.5 percent in 2023. "Taking into account the global and domestic economic environment, the GDP growth forecast for 2023 is maintained at 0.5 to 2.5 per cent," MTI said.

The fourth quarter growth also came in at a lower base than expected, clocking 2.1 percent year-on-year as against expectations of a 2.2 percent growth. A weakness in the construction and service sectors contributed to lower numbers in the fourth quarter.

Demand Outlook

The government said the demand outlook has improved owing mainly to the China reopening. "Singapore's external demand outlook for 2023 has improved slightly. In particular, growth in China is projected to pick up in tandem with the faster-than-expected easing of its COVID-19 restrictions," Gabriel Lim, permanent secretary for trade and industry, said, according to Reuters.

Singapore assets under management growth declines year-on-year
Monetary Authority of Singapore (MAS) Reuters

"Growth outlook of the U.S. and Eurozone economies remains weak amidst tighter financial conditions, which will weigh on consumption and investment spending in these economies," Lim added.

Economists said they would keep their growth outlook for the Singapore economy. "While we expect manufacturing activity to remain weak into this year, the services sector recovery – driven by the revival in international travel – will likely provide a significant offset," said Barclays regional economist Brian Tan, according to the Business Times.