January 4, 2023
SINGAPORE – Singapore’s economy grew by 3.8 per cent in 2022, slowing sharply from the 7.6 per cent growth achieved a year earlier, according to advance estimates from the Ministry of Trade and Industry (MTI) on Tuesday.
In the fourth quarter, the economy expanded 2.2 per cent on a year-on-year basis, moderating from the 4.2 per cent growth in the previous quarter.
The ministry did not comment on its November forecast for the economy to grow between 0.5 per cent and 2.5 per cent in 2023.
The fourth-quarter slowdown came on the back of a 3 per cent year-on-year contraction of the key manufacturing sector. This was a reversal from the 1.4 per cent growth in the previous quarter.
MTI said output shrank in the electronics, chemicals and biomedical manufacturing clusters, outweighing expansion in precision engineering, transport engineering and general manufacturing.
OCBC Bank chief economist Selena Ling said the manufacturing sector’s contraction was the first since the fourth quarter of 2020. “Manufacturing momentum has been faltering, especially on growing concerns over global recession and a pullback in demand for electronics, especially of semiconductors,” she said.
MTI said the construction sector grew by 10.4 per cent in the fourth quarter, accelerating from the 7.8 per cent growth in the previous quarter, as both public- and private-sector construction output continued to recover
However, in absolute terms, the value-added of the construction sector remained 19.3 per cent below its pre-pandemic level in the fourth quarter of 2019.
For the services sector, wholesale and retail trade as well as transportation and storage segments collectively grew 2.3 per cent in the fourth quarter, slower than the 5.7 per cent growth in the previous quarter.
However, within the services sector, accommodation and food, and real estate, administrative and support services collectively grew 8.2 per cent, extending the 9.3 per cent growth in the third quarter.
While overall economic growth has slowed from 2021, the 3.8 per cent estimate for 2022 is still better than MTI’s earlier forecast of 3.5 per cent for the year, thanks to the still-growing services sector. Final estimates for fourth-quarter and full-year 2022 growth will be released in February.
Analysts said anaemic global growth due to high inflation and rising interest rates has started to hit merchandise exports from Asia, pulling the region’s manufacturing sector into recession territory. However, a relatively resilient services sector aided by the reopening tailwinds should mitigate the weakness in manufacturing and also keep unemployment low.
“Manufacturing, traditionally, has not been the key driver of local employment, so a tapering in the sector’s growth momentum may not move the needle that much. The heavyweight employment driver is still the services sector,” Ms Ling noted.
Still, much depends on the outlook of the global economy, which could turn gloomier.
International Monetary Fund (IMF) managing director Kristalina Georgieva warned that 2023 will be a tougher year for the global economy than 2022.
“We expect one-third of the world economy to be in recession,” Dr Georgieva said in an interview on Sunday. “Why? Because the three big economies – the United States, the European Union and China – are all slowing down simultaneously.”
Global growth is forecast to slow from 6 per cent in 2021 to 3.2 per cent in 2022, and 2.7 per cent in 2023, the IMF said in its last World Economic Outlook report in October. This was echoed by British consultancy Centre for Economics and Business Research, which last week said the world faces a recession in 2023 as interest rate hikes aimed at tackling inflation will cause a number of economies to contract.
Mr Brian Tan, senior regional economist at Barclays Bank in Singapore, said the slump in manufacturing and regional trade activity will likely be a drag in 2023, but the recovery in international travel and tourism will boost part of Singapore’s services sector.
However, 2023’s most anticipated major economic event, the full reopening of China, is not off to a good start. Data published on Saturday showed Singapore’s top trade partner’s abrupt reversal of its zero-Covid policy pushed economic activity in December to the slowest pace since February 2020 as the virus swept through major cities and prompted people to stay home and businesses to shut.
Still, many analysts expect China’s growth to rebound in the second half of 2023. Gross domestic product growth is projected to pick up to 4.8 per cent for the year, after a 3 per cent gain in 2022, according to economists surveyed by Bloomberg.