Economists cut Singapore's 2023 growth forecast to 1.4% amid global slowdown: MAS survey

SINGAPORE: Private sector economists have cut their forecast for Singapore's economic growth this year to 1.4 per cent amid a global slowdown and inflationary pressures.

This is down from their projection of 1.9 per cent in March.

The findings from the latest survey of professional forecasters were released by the Monetary Authority of Singapore (MAS) on Wednesday (Jun 14). The survey was sent out on May 25.

Spillovers from an external growth slowdown emerged as the most cited downside risk to domestic outlook, as identified by 61 per cent of the 24 respondents. It was most frequently ranked as the top downside risk.

The respondents also flagged inflationary pressures and an escalation in geopolitical tensions as risks to the domestic growth outlook.

China in May banned US semiconductor giant Micron from selling chips to its key domestic industries, marking yet another escalation in the tense relations between both countries.

According to the survey, the manufacturing sector – which accounts for about one-fifth of Singapore's economy – is expected to contract by 1.3 per cent this year.

"The 2023 GDP (gross domestic product) growth forecast downgrade reflects the bigger than expected weakness in manufacturing, especially electronics, in the first quarter of 2023," said OCBC chief economist Selena Ling.

"Given China’s reopening hopes have fizzled of late with some deceleration seen in the recent April to May economic indicators, there is a heightening of concern for a more prolonged soft patch into the second and third quarter of 2023."

There were some bright spots in the latest MAS survey, with the construction sector forecast to grow by 7 per cent, up from the previous projection of 4.2 per cent.

The accommodation and food services sector is also expected to grow by 10 per cent, an increase from the previous forecast of 8.4 per cent.

Last month, some private sector economists said Singapore faces a "high risk" of slipping into a technical recession in the second quarter of this year.

Singapore's Ministry of Trade and Industry (MTI) in May maintained its 2023 growth forecast at 0.5 per cent to 2.5 per cent, with growth likely to “come in at around the mid-point” of this range.

Respondents to MAS' latest survey estimate that GDP will expand by 2.5 per cent in 2024.

INFLATION

Private-sector economists expect core inflation to come in at 4.1 per cent in 2023, unchanged from their projection in March.

Core inflation, which excludes accommodation and private transport costs, is forecast to hit 4.6 per cent in the second quarter of this year, according to the survey respondents.

The economists also expect core inflation to ease to 3 per cent next year.