Singapore 2023 GDP to grow around 1%; exports to contract deeper

SINGAPORE (ICIS)–Singapore’s trade-reliant economy is projected to grow at around 1.0% for the whole of 2023, with exports expected to post a steeper contraction amid the global economic slowdown.

The full-year GDP forecast issued by the Ministry of Trade and Industry (MTI) on Wednesday is the mid-point of the previous estimate of a 0.5-1.5% growth.

Non-oil domestic exports (NODX) for whole of 2023 are projected to contract by 12.0-12.5%, a sharper decline from the previous forecast of 9.0-10.0%, given weaker-than-expected performance in the first three quarters, according to trade promotion agency Enterprise Singapore.

Overall merchandise trade is now projected to contract by around 10% this year, near the high end of the previous estimate of a 9-10% decline.

“For the first three quarters of 2023, oil and electronics trade respectively drove 29% and 60% of total merchandise trade decline amid lower oil prices year-on-year and sluggish global electronics demand,” Enterprise Singapore said.

Q3 TRADE WEAKENS
In the third quarter, NODX declined by a steeper year-on-year rate of 18.8% compared with the 13.4% decline in the previous quarter.

Non-electronics NODX, which includes petrochemicals and pharmaceuticals, over the period fell for the fourth consecutive quarter, while electronics shipments shrank for the fifth consecutive quarter.

Petrochemical exports continued to contract, falling by 16.7%, but the rate of decline has eased from 30.1% in the second quarter.

Singapore is a major petrochemical hub in southeast Asia, housing integrated petrochemical complexes of energy giants ExxonMobil and Shell.

For the rest of 2023, firm oil prices should provide some support to oil trade in nominal terms, but this is expected to be moderated by worse-than-expected performance in electronics and non-oil exports.

2024 PROSPECTS
Singapore’s economy is expected to post growth of 1.0-3.0% in 2024, according to the MTI.

Among its major trading partners, the US and eurozone economies are projected to slow further in the first half of next year due to continued tight financial conditions, before picking up gradually in the second half, the MTI said.

“At the same time, as the post-pandemic boost in demand for services dissipates, there could be a rebalancing of demand towards goods in the year ahead,” the Singapore trade and industry ministry said.

“This, alongside a normalisation of inventory levels, is likely to support a turnaround in global manufacturing activity over the course of the year,” it added.

Higher oil prices “will support oil trade and in turn total trade” next year, Enterprise Singapore stated, noting that “global electronics demand is projected to gradually recover … as inventory levels normalize”.

“This would support total trade and NODX growth,” the agency added.

GLOBAL ECONOMIC HEADWINDS PREVAIL
The world economy is projected to post a 3.0% GDP growth this year, with a further slowdown to 2.9% expected in 2024, according to the International Monetary Fund’s (IMF) World Economic Outlook Report released in October.

Growth in the eurozone and ASEAN-5 (Indonesia, Malaysia, the Philippines, Singapore, and Thailand) are expected to pick up, while China, the US and Japan are expected to grow slower than in 2023.

The World Trade Organisation (WTO) forecasts global merchandise trade growth to slow to 0.8% in 2023 from 2.7% in 2022, before rebounding to 3.3% in 2024.

Import demand is expected to grow for most regions including Americas, Europe and Asia in 2024.

“Headwinds in the global economy including inflation, and the escalation of Israel-Hamas conflict or war in Ukraine could lead to renewed supply disruptions, weighing on global trade and output,” Enterprise Singapore said.

Global trade remains soft, and global trade volumes is expected to expand by just 0.3% this year, down from 5.1% in 2022 and 10.9% in 2021, said ICIS senior economist Kevin Swift.

Trade will likely recover in the next two years, to post growths of 2.9% in 2024 and 3.8% in 2025, according to Swift.

Focus article by Nurluqman Suratman

Thumbnail image: Container vessels at the Singapore Port in Keppel Harbour, 25 August 2021 (By Joseph Nair/NurPhoto/Shutterstock)