The Ministry of Trade and Industry (MTI) narrowed Singapore’s GDP Forecast for 2023 to between 0.5% to 1.5%. Down from the initial forecast of 0.5% to 2.5%.
This was initiated as the Singapore economy grew by just 0.5% in the 2nd quarter of 2023. What this really highlights is that while many sectors are still reporting higher growth compared to last year, there has been a stark slowdown in the quarter-on-quarter (qoq) numbers for certain sectors.
In the MTI press release, 6 sectors reported quarterly contractions.
#1 Manufacturing
Manufacturing shrank 1.0% on a qoq basis, and a sharper 7.3% on a year-on-year (yoy) basis. Weakness in the sector was attributed to output declines across all manufacturing clusters except for transport engineering.
MTI also reported that the subdued global economic backdrop means “growth the outlook for the manufacturing in Singapore sector remains weak for the rest of the year”. The electronics and precision engineering cluster was highlighted as being affected by the global electronics downturn.
#2 Accommodation
Supported by a robust recovery in international tourist arrivals, the accommodation sector grew 13% compared to last year. However, when compared to last quarter, we’re already seeing a slowdown, with the sector actually contracting 3.0%.
#3 Food & Beverage Services
The F&B services sector is experiencing a similar fate. Compared to the same period last year, the F&B services is buoyed by higher sales volumes at food caterers, cafes, food courts and other eating places, such as fast food outlets.
However, compared with last quarter, the sector is already seeing a marginal slow down, contracting 0.1%.
#4 Information & Communications
In the same vein, the strength in the information & communications sector may be weakening as well. Compared to last quarter, the sector contracted 0.6% (versus a growth of 3.6% in the 1st quarter).
Nevertheless, the sector is supported by an increase in activities in data hosting services and online marketplaces for goods and travel services – compared to last year.
#5 Professional Services
The professional services sector dipped 1.1% on a qoq basis. Similarly, while the sector reported an expansion compared to last year, it is experiencing a slowdown compared to last quarter.
This is mainly being driven by the architectural & engineering, technical testing & analysis, and other professional, scientific & technical services segments.
#6 Administrative & Support Services
Compared to last quarter, the administrative & support services sector shrank 1.2%. This is despite reporting a 6.3% growth compared to the same period last year.
The sector is mainly supported by the tourism-related sub-segments, such as travel agencies and tour operators.
Special Mention: Finance & Insurance
The finance & insurance sector reported a qoq growth of 0.3%. But, in contrast to the sectors above, it actually contracted 1.7% compared to last year.
MTI highlighted that weakness in the external economic environment and restrictive financial conditions are the forces subduing the sector.
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Two Downside Risks That Can Further Depress Singapore GDP Growth
Two downside risks were also highlighted in the MTI press release. First, a “more persistent-than-expected inflation” in advanced economies could lead to tighter global financial conditions. In turn, this may lead to a sharper slowdown in global spending and exacerbate the manufacturing downturn.
Second, escalations in the war in Ukraine and geopolitical tensions and global powers could lead to renewed disruptions in global supply chains, dampen consumer and business confidence, and weigh on global trade.
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