Singapore's Ministry of Trade and Industry (MTI) today slashed its gross domestic product (GDP) for this year to 3%-4%, from 3 to 5% estimated earlier, citing inflation and persistent supply chain disruptions.
MTI said the global economic environment has “deteriorated further” since its last assessment in May.
Stronger than-expected inflationary pressures and aggressive monetary policy tightening by central banks are set to weigh on growth in major advanced economies, such as the United States and Eurozone.
China continues to grapple with a deepening property market downturn and recurring domestic COVID-19 outbreaks; and supply chain disruptions are likely to persist for the rest of the year given how factors such as the Russia-Ukraine conflict and China’s zero-COVID policy remain.
“The external demand outlook for the Singapore economy has weakened compared to three months ago,” MTI said in its report.
Meanwhile, downside risks in the global economy remain “significant”.
These include the possibility of further escalations in the Ukraine war, disorderly market adjustments to monetary policy tightening in advanced economies, an escalation in regional geopolitical tensions and the trajectory of the COVID‐19 pandemic.
This means that the outlook for some outward-oriented sectors in Singapore has dimmed, said MTI.
For instance, the growth prospects of Singapore’s chemicals cluster and the fuels and chemicals segment of the wholesale trade sector have been adversely affected by the weakening economic outlook in China, which is a key market for petroleum and chemicals products from Singapore.
Growth in the water transport and finance and insurance sectors is also expected to be dampened by the projected slowdown in major external economies.
On the other hand, Singapore has transited to living with COVID-19 with the progressive removal of nearly all domestic and border restrictions. This has in turn supported the recovery of some segments of the economy, such as aviation- and tourism-related sectors.
MTI’s report also showed that the economy expanded 4.4 per cent on a year-on-year basis in the second quarter, slower than the Government’s advance estimate of 4.8 per cent but faster than the 3.8 per cent growth recorded in the first quarter.
Growth was mainly supported by the manufacturing, other services and information and communications sectors.
Taking into account Singapore’s GDP performance in the first quarter, the economy expanded by 4.1 per cent on a year-on-year basis in the first half of the year, said MTI permanent secretary Gabriel Lim at a press conference.
On a quarter-on-quarter seasonally adjusted basis, second-quarter GDP contracted slightly by 0.2 per cent, below the initial estimates of 0.9 per cent growth and a reversal from the 0.8 per cent expansion in the first quarter.