The Singaporean economy experienced slower growth in the first quarter of 2023, according to advance estimates released by the Ministry of Trade and Industry (MTI). The country’s gross domestic product (GDP) grew by 0.1% on a year-on-year basis, down from 2.1% in the previous quarter.
This marks a significant deceleration in economic activity, as Singapore had enjoyed a steady recovery in the second half of 2022.
On a quarter-on-quarter seasonally-adjusted basis, the Singaporean economy contracted by 0.7% in the first quarter of 2023, a reversal from the 0.1% expansion seen in the previous quarter. This was said to be largely due to weaker performance across several sectors, particularly manufacturing.
The manufacturing sector, which accounts for a significant portion of Singapore’s economy, contracted by 6.0% year-on-year in the first quarter of 2023. This is a significant drop from the 2.6% contraction seen in the previous quarter.
Output in all manufacturing clusters, except for the transport engineering cluster, contracted during this period.
On a quarter-on-quarter seasonally-adjusted basis, the manufacturing sector shrank by 5.2% in the first quarter, a reversal from the 1.0% expansion seen in the previous quarter.
The construction sector, on the other hand, continued to grow in the first quarter of 2023, expanding by 8.5% year-on-year. This extends the 10.0% growth seen in the previous quarter. Growth in the sector was supported by expansions in both public and private sector construction output.
However, the value-added of the sector remained 21.3% below its pre-pandemic level. On a quarter-on-quarter seasonally-adjusted basis, the construction sector expanded by 1.8% in the first quarter, faster than the 1.4% expansion seen in the previous quarter.
Among the services sectors, the wholesale and retail trade and transportation and storage sectors collectively contracted by 1.1% year-on-year in the first quarter of 2023, reversing the 2.4% growth seen in the previous quarter.
Within the group, the wholesale trade sector shrank in tandem with a decline in Singapore’s merchandise exports. By contrast, the retail trade and transportation and storage sectors expanded, with the latter supported by robust growth in the air transport segment.
On a quarter-on-quarter seasonally-adjusted basis, the services sectors as a group contracted by 1.0% in the first quarter, extending the 1.6% contraction seen in the previous quarter.
The information and communications, finance and insurance, and professional services sectors collectively grew by 1.9% year-on-year in the first quarter of 2023, moderating from the 2.5% growth seen in the previous quarter. All sectors within the group, except for the finance and insurance sector, expanded during this period.
Growth in the information and communications sector was supported by continued strong demand for IT and digital solutions, while that in the professional services sector was mainly driven by the other professional, scientific and technical services and architectural and engineering, technical testing and analysis segments.
Meanwhile, the finance and insurance sector contracted largely due to the weak performance of the banking and insurance segments. On a quarter-on-quarter seasonally-adjusted basis, the services sectors as a whole shrank by 1.0% in the first quarter, reversing the 1.1% growth seen in the previous quarter.
The remaining group of services sectors, which includes accommodation and food services, real estate, administrative and support services, and other services sectors, grew by 6.7% year-on-year in the first quarter of 2023, extending the 9.0% growth seen in the previous quarter. All sectors within the group expanded during this period.
In particular, the accommodation sector saw robust growth on account of a strong recovery in international visitor arrivals. On a quarter-on-quarter seasonally-adjusted basis, the services sectors in this group collectively expanded by 1.5% in the first quarter, faster than the 1.1% expansion seen in the previous quarter.
The weaker-than-expected growth in the first quarter of 2023 is a cause for concern, as Singapore had hoped to continue its strong economic recovery this year.
MTI said that the slower growth is attributed to several factors, including the ongoing impact of the COVID-19 pandemic on global trade and supply chains, as well as continued uncertainty in the global economic environment.
The MTI will release the preliminary GDP estimates for the first quarter of 2023, including performance by sectors, sources of growth, inflation, employment, and productivity, in the Economic Survey of Singapore in May 2023. This report will provide a more detailed picture of the Singaporean economy’s performance in the first quarter and the outlook for the rest of the year.
It is hoped that the government’s efforts to support businesses and workers during this challenging period will help to mitigate the impact of the economic slowdown and pave the way for a stronger recovery in the future.
