(Singapore 25 May 2023) The Ministry of Trade and Industry (MTI) today announced that the 2023 GDP growth forecast for Singapore has been maintained at “0.5 to 2.5 per
cent”, with growth likely to come in at around the mid-point of the range.

Also, the Singapore economy grew by 0.4 per cent on a year-on-year basis in the first
quarter of 2023, moderating from the 2.1 per cent expansion in the previous quarter. On a quarter-on-quarter seasonally-adjusted basis, the economy contracted by 0.4
per cent, a reversal from the 0.1 per cent growth in the fourth quarter of 2022.

The manufacturing sector shrank by 5.6 per cent year-on-year, worsening from the
2.6 per cent contraction in the preceding quarter. The weak performance of the
sector came on the back of output declines across all clusters except for the transport
engineering cluster. On a quarter-on-quarter seasonally-adjusted basis, the sector contracted by 4.8 per cent, a pullback from the 1.0 per cent expansion in the previous

The wholesale trade sector contracted by 2.5 per cent year-on-year, a reversal from
the 2.4 per cent growth in the preceding quarter. Within the sector, the machinery,
equipment & supplies segments contracted, while the fuels &
chemicals segment expanded. On a quarter-on-quarter seasonally-adjusted basis, the
sector shrank by 1.4 per cent, deteriorating from the 0.6 per cent contraction in the
previous quarter.

However, the contraction of manufacturing and wholesale trade sectors have been counterfected by the growth in real estate, though slowing down, and the accomodation sectors.

The real estate sector expanded by 9.2 per cent year-on-year, slowing from the 15.2
per cent growth in the previous quarter. Growth of the sector was supported by the
private residential property segment, as well as the commercial office and industrial
space segments. On a quarter-on-quarter seasonally-adjusted basis, the sector grew
by 2.2 per cent, extending the 2.1 per cent growth in the preceding quarter.

The accommodation sector expanded by 21.9 per cent year-on-year, the biggest increase rate among all the sectors, accelerating from the 7.8 per cent growth in the previous quarter. Growth during the quarter was supported by a strong recovery in international visitor arrivals from a low base in the same period of last year when inbound travel restrictions were still in place. On a quarter-on-quarter seasonally-adjusted basis, the sector grew by 9.7 per cent, faster than the 4.1 per cent growth in the preceding quarter.

Since the Economic Survey of Singapore released in February, the performance of
advanced economies such as the US and Eurozone has been more resilient than
expected, supported by domestic services demand. Nonetheless, their growth
outlook for the rest of the year remains weak.

In particular, the US’s GDP growth is projected to decelerate more significantly in the
second half of the year as personal consumption and investment growth slows due
to the lagged effects of monetary policy tightening, including on the labour market.

Similarly, GDP growth in the Eurozone is forecast to slow significantly as elevated
inflation amidst tight labour market conditions is likely to lead to further monetary
policy tightening, which will weigh on domestic demand.

In Asia, China’s economic recovery is likely to be stronger than earlier expected,
driven by a pickup in domestic services consumption following the lifting of its
COVID-19 restrictions. However, continued stresses in its property market, as well
as weakness in its industrial sector amidst subdued external demand conditions,
will continue to weigh on its recovery.

Meanwhile, despite weaker external demand for their merchandise goods and commodities, the growth prospects of key Southeast Asian economies such as Malaysia, Indonesia and Thailand remain positive, supported by resilient domestic demand as well as the continued recovery in tourism demand.

Against this backdrop, MTI’s assessment is that Singapore’s external demand
outlook for the rest of the year has weakened. Apart from the expected slowdown in the advanced economies, the electronics downcycle is likely to be deeper and
more prolonged than earlier projected. Spillovers from China’s services-led
recovery are also expected to remain weak given that services activities are less
import-intensive than industrial activities.

At the same time, downside risks in the global economy have risen. First, recent
banking sector stresses abroad have increased the risk of a sharper-than-expected
tightening in global financial conditions, which could weigh more heavily on
consumption and business investments and lead to a broader retraction in global
growth beyond the manufacturing downturn.

Second, escalations in the war inUkraine and geopolitical tensions among major global powers could lead to renewed supply disruptions, dampen consumer and business confidence, as well as weigh on global trade.

Domestically, the growth outlook for the aviation- and tourism-related sectors of the
Singapore economy remains positive given the ongoing recovery in international air
travel and inbound tourism. These include the air transport, accommodation and
arts, entertainment & recreation sectors, as well as the aerospace segment of the
transport engineering cluster.

On the other hand, however, the outlook for the manufacturing and other trade-related sectors of the economy has weakened. In particular, the manufacturing sector is projected
to see a deeper downturn, led by output contractions in the electronics and precision
engineering clusters in tandem with weaker global semiconductor demand, as well
as the chemicals cluster due to sluggish demand from China. Meanwhile, growth in
the water transport and finance & insurance sectors is likely to be dampened by the
broader slowdown in the global economy.