Trade officials said the range for 2023 could start from that floor to a ceiling of 2.5% – weaker than the “around 3.5%” expansion now forecast for this year. For the July-September quarter, the preliminary figure of 4.4% growth was trimmed to 4.1% year-on-year.
The weaker gross domestic product numbers come after the city-state, which is highly dependent on international trade for growth, reported earlier this month that non-oil exports shrank 5.6% on the year in October, pulling back from September’s 3.1% rise.
“Singapore’s external demand outlook has softened further due to the weaker outlook for the eurozone amid an energy crunch, as well as for China as it continues to grapple with recurring Covid-19 outbreaks,” Gabriel Lim, permanent secretary for the city-state’s Ministry of Trade and Industry, told an online briefing on Wednesday.
“For the rest of 2022, the weaker external economic outlook will weigh on the growth of Singapore’s outward-oriented sectors,” Lim added. “Looking ahead to 2023, GDP growth in most major economies is expected to moderate further.”
October’s decline in non-oil shipments broke an almost two-year streak of consistent expansion for Singapore exports – a key indicator experts watch to take the financial centre’s economic pulse.
“The drop in exports may be an early warning sign of a potential recession in 2023, led by a downturn in manufacturing and trade-related services,” analysts Chua Hak Bin and Lee Ju Ye of Malaysia’s Malayan Banking wrote in a report this month.
The analysts tipped the city-state’s exports to continue declining for the rest of this year, and throughout the first half of next, as external demand weakens, especially for electronics. “Mounting global headwinds are starting to overwhelm the reopening tailwinds.”
Singapore has enjoyed a boost from the lifting of Covid-19 border restrictions this year, welcoming hundreds of thousands of visitors as it works to restore its status as an Asian travel hub.
Its neighbour Thailand has experienced a similar lift, with a reinvigorated tourism sector helping the kingdom’s GDP to a year-on-year expansion of 4.5% for the third quarter, its National Economic and Social Development Council announced on Monday.
But unlike Thailand, which also saw a jump in personal consumption, Singapore’s small market means global trade does the heavy lifting for its GDP.
Russia’s invasion of Ukraine this year has contributed to geopolitical instability, soaring energy and food prices, and monetary tightening by several central banks to rein in inflation.
“We continue to expect global demand heading towards a downturn on the back of more aggressive monetary policy tightening,” Alvin Liew, senior economist at Singaporean lender United Overseas Bank wrote in a report this month. “The worsening electronics performance, and increasingly weaker demand from more top export destinations, especially China, are clearly weighing negatively,” he said of the impact on Singapore’s export momentum.
Yun Liu, economist at the global research unit of financial institution HSBC observed that the country’s lower shipments to markets including mainland China, the Association of Southeast Asian Nations and the European Union more than offset gains seen for trade with the US, Japan and Taiwan.
“While the weakness was broad-based, the most evident impact on rising trade challenges is well reflected in its electronics weakness,” the analyst wrote of Singapore’s situation recently. “The message is clear: trade headwinds are intensifying.”
Singapore’s trade officials last quarter had lowered their expectations for full-year GDP growth to between 3% and 4%, narrowing the previous range of 3% to 5%.