Singapore Fixed Investment (ann. var. %)

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GDP grows at softest pace since Q4 2020 in Q1 2023

GDP growth lost momentum, falling to 0.1% year on year in the first quarter from 2.1% in the fourth quarter of last year. Q1’s reading marked the softest expansion since Q4 2020.

The industrial sector contracted 4.1% annually in the first quarter—a larger drop than the fourth quarter’s 1.1% decrease and the worst result since Q2 2020. The decline was driven by slower growth in the construction sector and broad-based contractions in all subsectors of manufacturing except transport engineering. In addition, the services sector lost steam, growing 1.8% in Q1 (Q4: +4.0% yoy). A contraction in retail trade and lower expansions in the hospitality, information and communication sectors drove the reading.

On a seasonally adjusted quarter-on-quarter basis, GDP declined 0.7% in Q1, contrasting the previous period’s 0.1% growth. Q1 marked the worst reading since Q2 2021.

The economy is seen gaining steam in Q2 on the back of the continued recovery of the Chinese economy, as well as the consumption-supportive FY 2023 budget—which involves extra handouts for lower and middle-income households starting from April onwards.

On this year’s outlook, analysts at the EIU commented:

“Private consumption growth will slow this year owing to high inflation, which erodes real household disposable income. Business investment will be suppressed by higher borrowing costs and dampened sentiment. We expect external demand to contract because of a global economic slowdown, especially in most advanced economies. However, China’s rapid lifting of pandemic-induced restrictions from December 2022 will mitigate this modestly.”