Singapore Economic Forecast

Following Q2’s acceleration, annual GDP growth is likely speeding up further in Q3. In July, inflation fell to a one-and-a-half-year low, boding well for private spending. Moreover, tourist arrivals grew nearly 90% year on year in July–August, likely boosting the services sector. Additionally, manufacturing output shrank less than in Q2. Less positively, year-on-year non-oil exports fell at the sharpest pace since January in July–August. The housing market showed further signs of cooling midway through Q3, with August home sales swinging into a year on year contraction. In politics, former Minister of Finance Tharman Shanmugaratnum won the 1 September presidential elections by a landslide. Analysts see Tharman’s victory as supportive of Singapore’s financial reserves and of a shift to a redistributive state, which should especially benefit lower-income groups.

Inflation eased to 4.1% in July (June: 4.5%) on lower price growth for food, transport, and housing and utilities. The headline rate should average lower in 2023 than last year on softer domestic demand, lower commodity prices year on year and the effects of monetary tightening. That said, wage pressures, vehicle quotas and high taxes will keep inflation elevated.