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Singapore's GDP expands by 3.6% in 2022; 2023 growth forecast kept at 0.5% to 2.5%

Felicia Tan and Bryan Wu
Felicia Tan and Bryan Wu2/13/2023 08:10 AM GMT+08  • 5 min read
Singapore's GDP expands by 3.6% in 2022; 2023 growth forecast kept at 0.5% to 2.5%
The country’s economy grew by 2.1% y-o-y in the 4Q2022. Photo: Bloomberg
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Singapore’s GDP grew by 2.1% y-o-y in the 4Q2022, moderating from the 4.0% expansion in the previous quarter.

The GDP for the 4Q2022 brings the country’s full-year GDP to 3.6%, down from the Ministry of Trade and Industry’s (MTI) flash estimate of 3.8% and moderating from the 8.9% growth in 2021.

The MTI revised its 2021 estimate upwards from the 7.6% initially released in February last year to account for data updates and revisions from various sources, including the annual sectoral surveys carried out in 2022.

However, the full-year GDP was in line with market watchers’ estimates in the Monetary Authority of Singapore’s (MAS) December survey of professional forecasters.

During the last quarter, the manufacturing sector shrank by 2.6% y-o-y due to the output declines in the biomedical manufacturing, chemicals, electronics and general manufacturing clusters.

Meanwhile, the construction sector expanded by 10.0% y-o-y as output for both public and private sectors improved.

See also: Singapore’s economy grows by 7.6% in 2021; 2022 GDP forecast range maintained at 3% to 5%

The wholesale trade sector grew by 2.4% y-o-y, moderating from the previous quarter’s 4.1%. Growth was mainly due to the machinery, equipment & supplies segment, which was in turn bolstered by the wholesaling of electronic components and telecommunications & computers.

The retail trade sector grew by 5.1% y-o-y due to a robust increase in non-motor vehicle sales volume, outweighing a decline in motor vehicle sales volume.

The transportation & storage sector expanded by 2.5% y-o-y mainly due to the air transport segment as well as expansions in the land and water transport segments.

See also: Briefs: MAS upbeat on alternative investment space, calls DBS disruption 'unacceptable' in separate statement

The accommodation sector expanded by 7.8% y-o-y due to a recovery in international visitor arrivals.

The food and beverage (F&B) services sector expanded by 19.6% y-o-y as all segments recorded growth.

The information & communications sector grew by 5.6% y-o-y due to the information technology (IT) & information services segment, which was, in turn, supported by sustained growth in IT development, consultancy, data hosting and related activities.

The finance & insurance sector contracted by 0.3% y-o-y due to contractions in the banking and insurance segment. The banking segment fell due to lower net fees and commissions and weaker lending activity. The contractions more than offset the expansions in the other auxiliary activities and fund management segments.

The real estate sector increased by 15.2% y-o-y due to the private residential property segment, as well as the commercial office and industrial space segments.

The professional services sector grew by 6.1% y-o-y due to the architectural & engineering, technical testing & analysis, as well as other professional, scientific & technical services segments.

The administrative & support services sector expanded by 10.5% y-o-y due to expansions in both the other administrative & support services and rental and leasing segments.

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The other services industries grew by 6.0% y-o-y with expansions from all segments.

For the full year, the manufacturing sector grew by 2.5%, slower than the 13.3% growth in 2021. All clusters within the sector expanded, aside from the chemicals and biomedical manufacturing clusters.

The construction sector posted growth of 6.7%, extending the 20.5% expansion in 2021, supported by both public and private sector construction works, while the services producing industries also eased to 4.8%, from the 7.6% expansion in 2021.

Overall growth for the year was driven mainly by the wholesale trade, manufacturing and other services sectors.

Outlook for 2023

In 2023, the MTI has kept its growth forecast for the year at 0.5% to 2.5%.

In a media briefing on Feb 13, MTI permanent secretary Gabriel Lim notes that Singapore’s demand outlook for 2023 has improved “very slightly”, with growth in China projected to pick up in tandem with the faster-than-expected easing of its Covid-19 restrictions.

“China’s faster-than-expected reopening from the Covid restrictions will definitely not just help benefit Singapore’s sectors — for example, tourism, aerospace and so on — but also uplift regional economies, which will in turn also have a positive second-order effect on Singapore,” he says.

The MTI’s growth outlook for the aviation- and tourism-related sectors such as air transport, accommodation and arts, and entertainment and recreation has improved, while the output of the aerospace segment is also expected to be bolstered by the improved outlook for air travel.

However, Lim emphasises that uncertainties in the global economy remain. “These include the impact of tighter financial conditions across many advanced economies on global growth, as well as the risk of further escalations in the war in Ukraine and geopolitical tensions among major global powers,” says Lim, who cautions that the growth outlook of the US and Eurozone economies will weigh on consumption and investment spending in those economies.

Given the broader slowdown in the global economy, MTI expects the growth outlook for other outward-oriented sectors to remain weak. Lim says the semiconductors segment of the electronics cluster is expected to be negatively affected by weaker global semiconductor demand, while the precision engineering cluster is projected to be weighed down by a cutback in capital spending by semiconductor manufacturers.

On Feb 9, the Economic Development Board (EDB), an MTI agency, announced record high fixed asset investments of $22.5 billion for 2022, driven by the electronics sector amid a supply and demand imbalance for semiconductors — but warned that similar levels of investment were not to be expected this year.

Lim also expects growth in the wholesale trade, water transport, and the finance and insurance sectors will be dampened by the slowdown in major external economies.

In response to a question during the briefing, Monetary Authority of Singapore (MAS) chief economist Edward Robinson says Singapore’s current monetary policy stance remains “appropriate”. “The recent out-turns in inflation and growth have come somewhat closer in line with our expectations, and MAS’s next policy review accordingly is scheduled for April 2023,” he says.

“The cumulative effects of the monetary policy tightening since October 2021 will slow the inflation momentum and ensure that price pressures do not become entrenched in the economy,” adds Robinson.

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