A Reuters poll has shown that Singapore's economic growth hit a slower pace in the first quarter than expected. Preliminary data on first quarter economic growth is due to be released on Friday. If the economic growth decelerates, the Singapore central bank will have its task cut out as it battles persistent inflation. In a worrying development, Singapore's core inflation is at 5.5 percent, which is a 14-year high.
GDP Grows by 0.6%
According to the Reuters poll, the gross domestic product (GDP) of Singapore grew by 0.6 percent in the January-March period compared with a year ago.
Singapore's fourth quarter economic growth had also come 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.
According to data released in February, Singapore's economy expanded by 3.6 percent in 2022. Despite the lower than expected annual growth, the government maintained the earlier projection of growth in the current year.
The Ministry of Trade and Industry (MTI) said 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.
In October last year, Singapore's central bank said the economy was experiencing a rare headwind. While the economy was projected to slow down further, labor demand was also expected to lower and the wage growth will also be moderate. The Monetary Authority of Singapore (MAS) said the economy's growth in the next quarter will be subdued on account of factors like the tightening in global financial markets and the continued Covid-19 curbs in some major trading partners.
The latest Reuters poll showed that the manufacturing, which is Singapore's mainstay, recorded contraction in five straight months. The slowing global demand for semiconductors was one of the key drivers of the dip in Singapore's manufacturing.
Analysts, however, hope that the weakness in manufacturing will be offset by a revival in the services industry. "The pickup in visitor arrivals, including from China, will benefit the hospitality and F&B industries. Private consumption also remains supported due to the healthy labour market conditions ... Going ahead, the services should still continue to underpin GDP growth in the coming quarters," Selena Ling, head of treasury research and strategy at OCBC, said, according to the agency.