While Singapore dodged a technical recession in the second quarter, economists remain gloomy on the outlook for the year, saying the economy is likely to stay stagnant and recovery is uncertain.

One analyst said he expects the government to downgrade its full-year forecast.

In May, the Ministry of Trade and Industry (MTI) had maintained its 2023 growth forecast for Singapore at 0.5 to 2.5 per cent. 

However, the economy will have to grow over 1.6 per cent on-quarter on average in the second half of the year to hit the middle of that range, said Mr Alex Holmes, a senior Asia economist at consultancy firm Oxford Economics.

“That appears unrealistic and a downgrade is likely,” he added. 

“Given that Singapore is such a trade-dependent nation and exports are so important to its GDP (gross domestic product), the fact that external demand has been rather weak is really weighing on the manufacturing sector,” Mr Holmes told CNA’s Asia Now on Friday (Jul 14).

He pointed to the aggressive tightening of monetary policies, particularly in Western economies, dampening exports from other markets.

“The lag impact to that is still feeding through. As those economies slow, that will weigh on import demand and this means the chances of a strong pickup in the second half of the year, or even in 2024, are rather slim,” he said. 

Trade outlook with the world’s biggest economies also looks uncertain, Barclays senior regional economist Brian Tan said.

While the United States has been more resilient than many market watchers expected, its economy will continue to slow if the Federal Reserve is persistent on keeping interest rates high.

The initial shine of China’s reopening at the start of the year, which was widely expected to significantly boost regional economies, has also fizzled out, Mr Tan said.

“Momentum is already fading on China’s reopening. The recovery has been mainly in its services segment, which tends not to consume a lot of imports from the rest of the world. As a result, we’ve not seen that much of a pickup in terms of shipments to China.”


Singapore’s economy grew 0.7 per cent year-on-year for the April to June period, according to advanced GDP estimates released by MTI on Friday.

On-quarter, the economy recovered to positive territory at 0.3 per cent, from a 0.4 per cent contraction in the January to March period.

The rebounded helped Singapore escape a technical recession, commonly defined as two consecutive quarters of negative growth in real GDP.

When asked if Singapore is still at risk of a technical recession, Mr Tan replied that the economy looks to be in the clear, at least for the rest of the year.   

“We are already seeing some signs of stabilisation in exports around the region,” he said.

“My guess would be that we are already seeing the bottom of the weakness that we had been getting recently. Hopefully for the rest of this year, there is a little bit of a gradual pickup.

“But how strong that would be, we will be quite cautious. We think the recovery, if there is one, is going to be relatively gradual. I would describe it more like a stabilisation rather than a significant jump from where we have been.”


Core inflation is expected to moderate into the end of the year, said Mr Tan.

However, he cautioned that it is likely to remain elevated, between the 2.5 and 3 per cent range.

This is due to a sluggish economy and a tight labour market where many businesses are still struggling to find enough workers, he said.

A strong Singapore dollar will also help temp down some of the inflationary pressures, Mr Holmes said.

“Singapore imports most of the things it consumes. So a stronger currency pushes down the price of those imports,” he explained.

However, the weak economic growth outlook is likely to prompt the Monetary Authority of Singapore (MAS) to loosen monetary policy sooner than expected, he added. 

“The weak growth backdrop will give the MAS food for thought. We have previously said we expect the authority to loosen in early 2024, but there is a risk such a move comes sooner,” he said. 

Source: CNA