Singapore sees travel boom shielding economy from recession

by KARTHIKEYAN SUNDARAM & XIAO ZIBANG

SINGAPORE is confident that a rebound in travel that’s boosting the services sector will help the island’s economy avoid a recession this year despite a darkening global outlook.

Authorities retained their forecast for GDP growth to range between 0.5% and 2.5%, with the actual expansion seen likely coming in at the midpoint. The Ministry of Trade and Industry (MTI) also published last Thursday final estimates for the first quarter (1Q23), which showed GDP declined an annualised 0.4% from the previous three months, better than the 0.7% drop estimated earlier.

“We do not expect technical recession this year,” said Yong Yik Wei, MTI’s chief economist. “Given the downside risks and the weakening outlook, we cannot rule out the possibility that there could be some quarters of negative QoQ (quarter-on-quarter) growth this year. But again, that’s not our baseline,” she said, referring to the sequential performance.

While the ministry acknowledged that downside risks in the global economy have risen and they could weigh more heavily on consumption and business investments, Yong said the services sector continues to be resilient and should lend some support to growth as well as to employment.

The outlook for aviation and tourism sectors remains sanguine, boosting transport, hotels, entertainment and recreation, the ministry said.

Singapore’s economy relies heavily on trade and is vulnerable to shocks resulting from disruptions in commerce, especially involving China, the city-state’s No 1 trading partner. In a separate statement last Thursday, Enterprise Singapore said it expects non-oil domestic exports to decline between 8% and 10% in 2023.

That downgrade to the forecast takes into account the worse than expected exports performance, with outbound shipments recording a contraction every month so far this year.

Year-on-year, the economy grew 0.4% in the 1Q23, compared to an earlier estimate of a 0.1% expansion, data from MTI showed.

Key numbers from the GDP print:

Manufacturing declined 5.6% in the 1Q23 from a year ago.
Services producing industries grew 2.0%; construction expanded 7.2%.
Accommodation expanded 21.9% from a year earlier.

“Even if the Singapore economy were to slip into a technical recession, it is really very much manufacturing- and trade-led,” said MTI’s Yong. — Bloomberg