Opening Remarks by PS Mr Gabriel Lim for Economic Survey Of Singapore 3Q 2023

1                    Good morning and welcome to this media conference.

2                    Details of Singapore’s economic performance in the third quarter, as well as economic outlook for 2023 and 2024, are contained in the press release. Let me highlight a few key points.

3                    In the third quarter of 2023, the Singapore economy grew by 1.4 per cent on a quarter-on-quarter seasonally-adjusted basis, faster than the 0.1 per cent growth in the second quarter. On a year-on-year basis, GDP growth picked up to 1.1 per cent, from 0.5 per cent in the previous quarter. This brought GDP growth in the first three quarters of the year to 0.7 per cent year-on-year.

4                    I will now turn to Singapore’s economic outlook for the rest of the year and next year.

5                    Since the last media briefing in August, the US economy has performed better than expected, largely due to resilience in its domestic services activity. However, for the rest of the year, growth in the US and Eurozone is projected to moderate due to the cumulative effects of monetary policy tightening. Likewise, China’s growth is likely to slow further amidst ongoing weaknesses in its property sector and domestic consumption, as well as subdued external demand. At the same time, global electronics demand remains sluggish given elevated inventory levels.

6                    Given subdued external demand, Singapore’s manufacturing and trade-related sectors such as precision engineering and water transport are likely to remain weak for the rest of 2023. On the other hand, the ongoing recovery in air travel and inbound tourism is expected to support the growth of aviation- and tourism-related sectors such as air transport and accommodation. Meanwhile, resilient labour market conditions will continue to lend support to consumer-facing sectors like retail trade and food & beverage services.

7                    Taking into account the performance of the Singapore economy in the first three quarters of the year, as well as the latest external and domestic developments, MTI is narrowing the 2023 GDP growth forecast for Singapore to “around 1.0 per cent”, from “0.5 to 1.5 per cent”.

8                    Looking ahead to 2024, GDP growth in major economies such as the US and Eurozone is likely to slow further in the first half of the year due to continued tight financial conditions, before picking up gradually in the second half. Similarly, China’s growth is expected to ease in 2024 given sustained weaknesses in its property sector and domestic consumption.

9                    On the other hand, as the post-pandemic boost in demand for services dissipates, there could be a rebalancing of demand towards goods in the year ahead. This, alongside a normalisation of inventory levels, is likely to support a turnaround in global manufacturing activity. In particular, global electronics demand is projected to see a recovery, which will bolster the growth of most regional economies.

10               However, significant downside risks in the global economy remain. First, sticky core inflation in advanced economies could induce central banks to maintain current high interest rates for longer. Second, an escalation or widening of the Israel-Hamas conflict or war in Ukraine could lead to renewed supply disruptions and commodity price shocks. The confluence of these factors could weigh on both business and consumer sentiments along with demand, leading to a slowdown in global growth and trade.

11               Against this backdrop, the growth prospects of the manufacturing and trade-related sectors in Singapore, such as electronics, precision engineering and wholesale trade, are expected to improve in tandem with the turnaround in global electronics demand. Meanwhile, the finance & insurance sector is forecast to post a modest recovery as global interest rates moderate.

12               At the same time, the continuing recovery in air travel and tourist arrivals will support the growth of our tourism- and aviation-related sectors, although the pace of growth is likely to moderate. Similarly, our consumer-facing sectors are projected to continue to expand.

13               Taking these factors into account, and barring the materialisation of downside risks, the Singapore economy is expected to grow by “1.0 to 3.0 per cent” in 2024. Given the uncertainties in the global economy, MTI will continue to monitor developments in the year ahead, and adjust the forecast over the course of the year if necessary.

14               Together with my panel members, I am now happy to take your questions.