National Outlook Singapore – 2023

Private-sector economists have cut their growth forecast for Singapore, with the estimate that GDP will expand by 1.8 per cent in 2023. This is down from an earlier projection of 2.8 per cent growth, amid concerns about a global economic slowdown.

In the latest survey of professional forecasters released by the Money Authority of Singapore (MAS) on December 14, spillovers from an external growth slowdown were the most-cited downside risk.

Respondents were concerned about risks from an escalation in geopolitical tensions, as well as the impact of China’s COVID-19 lockdowns and social unrest, according to the quarterly MAS survey. The survey was sent out on November 23, before China rolled back its tough COVID-19 rules.

The lower forecast is in line with a worsening global outlook, with some advanced economies expected to slip into recession due to the Federal Reserve’s monetary tightening and the fallout from the war in Ukraine.

Singapore’s Ministry of Trade and Industry (MTI) said in November that the country’s economic growth is forecast to slow to 0.5 per cent to 2.5 per cent in 2023, down from the projected 3.5 per cent growth this year.

Manufacturing has turned from a key driver to a drag. Growth momentum in the sector is waning due to China’s slowdown, a decline in global electronics demand, and tighter liquidity conditions. China’s unwinding in COVID measures in 2023 will be pivotal, but rhetoric is still hawkish. A gradual and calibrated approach in the normalisation process can be expected in the coming quarters. If further easing of China’s COVID measures pans out, the pent-up demand could be significant for the region. That said, China’s COVID policy is a wild card, and a cautious view for now is preferred, given the high degree of uncertainty.

While recovery in the services sector has thus far been encouraging, its sustainability is in doubt. Firstly, the existing manpower crunch would put a lid on the near-term prospects of the cluster. The externally oriented services such as shipping, wholesale trade, and financial services could potentially be weighed down by a weaker global demand, higher risk premiums and margin erosion. Without the fresh influx of Chinese tourists, the reopening impetus will start to wane. A weaker employment outlook will also weigh on the domestic service sector. Expect some signs of weakness in the services sector to emerge by mid-2023.

Economic growth momentum will slow further in 2023. Growth in the fourth quarter could potentially fall below 2% YoY with risk of another sequential decline due to further drag from the manufacturing sector. Expect growth performance to slow to 2.2% in 2023, and a technical recession within the next three quarters should not be discounted.

After five rounds of tightening by the Monetary Authority of Singapore (MAS), and visible signs of global inflationary pressure abating, price pressure within Singapore appears to be easing. Consumer Price Index (CPI) inflation has peaked, with the latest October 2022 reading dipping to 6.7%. Going forward, while base effect and the knock-on impact of slower growth on demand and the labour market could make for lower inflation reading, a 1%-point hike in the Goods and Services Tax (GST) to 8% in Jan 2023, will offset the trajectory of inflation readings for the full year. Expect headline CPI inflation to average 6.3% in 2023, with core inflation for the full year likely to come in at 4.2%.

Hiring Trends

Concerns about an economic slowdown have slightly tempered hiring optimism among employers in Singapore, though they are still prepared to pay more to attract and retain enough staff to gear up growth efforts.

The employers reported a net employment outlook of 33 per cent in the first quarter of 2023, a decline for the second straight quarter after a record high of 40 per cent in the third quarter of 2022.

The net employment outlook is a measure of hiring optimism, defined as the percentage of companies surveyed that intend to take on new staff minus the percentage that intend to downsize.

Singapore employers from nine sectors polled in the quarterly survey reported a net positive outlook, with those in finance and real estate, energy and utilities, and consumer goods and services driving the hiring demand, posting net positive outlook figures of between 39 per cent and 57 per cent.

A hiring boom is anticipated in finance and real estate, which posted the strongest outlook – 57 per cent – among all sectors polled in Singapore, and this figure is the strongest globally for the sector.

The weakest labour markets are forecast to be in healthcare and life sciences, communication services, and other industries – a category that comprises sectors beyond the other eight, such as public service and education.