SINGAPORE expects economic growth to decelerate sharply next year amid a global slowdown, even as the city-state ruled out a recession.

GDP growth will probably slow to between 0.5% and 2.5% in 2023, according to estimates released by the Ministry of Trade and Industry (MTI) on Wednesday.

A recession is not the baseline scenario, although there are downside risks, an MTI official said at a briefing on Wednesday.

The reading follows a revision to the economy’s third-quarter performance, when GDP expanded 1.1% from the previous quarter — worse than the MTI’s 1.5% initial reading, as well as the median in a Bloomberg survey of economists.

The trade-reliant city-state sees a hit to demand globally from tighter monetary policies to contain soaring inflation, as well as weaker consumption growth because of China’s zero-Covid policy. Singapore also flagged risks to financial stability due to rising interest rates and capital flows that have implications for regional economies.

The Monetary Authority of Singapore was among the earliest to start tightening policy last year, and delivered its fifth move in October as consumer price gains hovered at a 14-year high.

“Singapore’s economy will face a slew of headwinds next year,” said Tamara Henderson, Asean economist at Bloomberg Economics. “Substantial reopening by China is likely needed to push growth to the upper end of the government’s forecast.”

On a year-on-year basis, the economy expanded 4.1% in the three months through September, slower than the 4.4% reading in the advance estimate, and 4.3% median growth predicted in the survey. That nudged the government to narrow its 2022 growth forecast to 3.5% from a range of 3%-4% seen previously.

The city-state benefitted this year from pent-up demand as the economy reopened from the pandemic, and while growth prospects still remain strong for several sectors such as travel and tourism, weak external demand conditions risk outweighing the positives.

Non-oil exports data for October showed the first decline in 23 months, underscoring the vulnerability of the export-dependent economy. – BLOOMBERG