Singapore GDP (SGD bn)

Economy grows at softest pace since Q1 2021 in Q4

GDP growth slowed markedly to 2.2% year on year in the fourth quarter, from 4.2% in the third quarter. Q4’s reading marked the softest expansion since Q1 2021.

The industrial sector contracted 1.3% annually in the fourth quarter, contrasting the third quarter’s 2.1% increase and marking the worst result since Q2 2020. This was the result of contractions in the electronics, chemicals and biomedical manufacturing subsectors, which more than offset strong construction activity growth. In addition, the services sector lost steam, growing 4.1% in Q4 (Q3: +5.8% yoy). That said, the hospitality sector continued to register a bumper expansion thanks to a post-pandemic bounce-back in tourism.

On a seasonally-adjusted quarter-on-quarter basis, economic growth cooled to 0.2% in Q4, compared to the previous quarter’s 1.1% expansion.

The economy is seen losing steam in Q1 on the back of softening goods demand from developed markets. However, recovering tourism, a supportive fiscal stance and China’s reopening will provide support.

Commenting on the outlook for 2023 as a whole, United Overseas Bank’s Alvin Liew said:

“We project the US and European economies (which are key end markets for Singapore) to enter a recession this year amidst aggressive monetary policy tightening stance among these advanced economies. This will directly impact the manufacturing and external-oriented services sectors. We expect the manufacturing sector to contract by 5.4% in 2023 (from +2.6% for 2022). Upside growth factors could be attributed to the continued recovery in leisure and business air travel and inbound tourism, which will benefit many in-person services sectors, and the impact of China’s reopening from 8 Jan.”