Singapore’s recovery held up in 2022, with a relatively strong year-end performance shoring up the economy ahead of an expected global slowdown this year.
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Singapore’s recovery held up in 2022, with a relatively strong year-end performance shoring up the economy ahead of an expected global slowdown this year.
Gross domestic product grew 3.8% during the year, according to advance estimates Tuesday from the Ministry of Trade and Industry. That’s a slight beat from the government’s projection for a 3.5% annual expansion.
The better-than-forecast performance followed a 2.2% GDP expansion in the three months through December from a year earlier. The economy grew 0.2% last quarter from the previous three months.
The Singapore dollar initially rose on the GDP headlines, but reversed course after failing to breach the 1.34 line against the US dollar.
The report showed one clear risk ahead for the trade-reliant economy, with manufacturing shrinking 3% year-on-year in the fourth quarter for the first contraction since the three-month period ended June 2020 and in line with a softening in the region’s trade outlook.
Five purchasing managers index reports out Tuesday illustrated the ongoing weakness across trade-heavy Asia, with China, Taiwan, Malaysia and Vietnam all remaining in contraction territory and just Philippines notching an expansionary reading, at 53.1. Covid-battered China’s Caixin reading was 49, for a fifth consecutive contraction.
Singapore’s exports declined in November, with the trend likely to continue well into 2023 as the world economy slows amid tighter monetary policy. The city-state previously forecast that exports — which are more than one-and-a-half times its GDP — will decline 2% in 2023 in the worst-case scenario and post zero growth in the best case.
“We must brace ourselves for the uncertainties ahead,” Prime Minister Lee Hsien Loong said Saturday in his New Year’s Eve message to Singaporeans, referring to a troubled international outlook. “Our economy will be affected,” he said.
Lee on Saturday reiterated a government forecast for 0.5%-2.5% GDP growth in 2023. While many advanced economies are staring at a downturn, the city-state has maintained that a recession is not its base case.
While China’s reopening carries potential economic upsides for the city-state, Lee said it remains to be seen how soon the Asian giant recovers from Covid-19. Even so, some of Singapore’s biggest trading partners face economic headwinds, with Lee predicting that the US and Europe “may well” enter recession this year.
“With external demand set to soften further, export-dependent sectors are in for a tough 2023,” Alex Holmes, senior Asia economist at Oxford Economics, wrote in a report after the GDP data. “Moreover, lower export earnings will weigh on domestic demand growth due to the drag imparted on business investment and employment growth.”
Separate data Tuesday showed Singapore home prices climbed 0.2% in the three months to December, the lowest quarterly increase in 2022.
The risk-laden growth outlook, combined with stubbornly high inflation, complicates policy decisions for the Monetary Authority of Singapore, which is next scheduled to review measures in April.
The core inflation measure — which excludes private transport and accommodation, and is closely watched by the MAS — rose 5.1% in November from a year earlier, the same pace as the previous month and fueling speculation that the central bank could meet sooner than April to try to damp price growth. Last year, the MAS conducted two surprise inter-meeting moves in January and July.
–With assistance from Kevin Varley, Mark Cranfield, Andrea Tan and Sing Yee Ong.
(Updates with additional data starting from sixth paragraph.)
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