Singapore expects economic growth to slow in 2023

But technical recession unlikely due to resilient recovery in service sector, says MTI

- Ovais Subhani

The growth outlook for Singapore's economy has become more challenging, but a significant downturn is still unlikely, the Ministry of Trade and Industry (MTI) said on Thursday.

It said the economy is expected to expand by 0.5 percent to 2.5 percent in 2023, with growth likely to come in at around the midpoint of the range.

Even as MTI's guidance shows that the higher end of the forecast range is probably out of reach amid weak global demand for Singapore's exports, the economy may still avoid a technical recession two consecutive quarters of contraction due to a resilient recovery in the service sector led by travel- and tourism-related businesses.

"We do not expect a technical recession this year," said Ms Yong Yik Wei, MTI's chief economist.

"But obviously, given the downside risks and the weakening outlook, we cannot rule out the possibility that there could be some quarters of negative quarter-on-quarter growth this year. But again, that's not our baseline," she said.

Most analysts, including those at DBS Bank and Nomura, agreed with MTI's assessment, saying that while the economy will slow, another quarter of negative growth is unlikely.

MTI on Thursday also revised up its data for first-quarter gross domestic product growth. In the first three months of the year, the economy grew by 0.4 percent year on year, slowing from the 2.1 percent expansion in the previous quarter. The figure was higher than the advance estimate of 0.1 percent growth released in April.

On a quarter-on-quarter seasonally adjusted basis, the economy shrank by 0.4 percent, a reversal from the 0.1 percent growth in the fourth quarter of 2022.

Still, this was better than the previous estimate of a 0.7 percent decline and a forecast for a 0.6 percent contraction in a Bloomberg survey.