Economists lift Singapore’s 2023 growth forecast slightly to 1.9% on China rebound hopes: MAS survey

The median forecast for GDP growth in the survey, that was conducted in February, came at 1.9 per cent for the whole of 2023. PHOTO: REUTERS

SINGAPORE - Private sector economists have raised slightly their forecast for Singapore’s economic growth in 2023, with the pace seen accelerating to 2.5 per cent in 2024, according to a Monetary Authority of Singapore (MAS) survey.

Most of the 21 economists and analysts who participated in the quarterly survey believe robust growth in China, underpinned by economic reopening and policy easing, better-than-expected global growth, and a faster technology sector recovery could further boost Singapore’s outlook.

The median forecast for gross domestic product (GDP) growth in the survey, which was conducted in February, came in at 1.9 per cent for the whole of 2023.

This was up from the 1.8 per cent GDP growth projected in the previous survey published last December.

The estimate lands within the top half of the Government’s broad forecast range of 0.5 per cent to 2.5 per cent growth for 2023.

The median forecast in the survey for Consumer Price Index-All Items, also called headline inflation, for 2023 was 5 per cent, down from 5.2 per cent in the December survey.

But the forecast for core inflation, which excludes accommodation and private transport costs, was raised a notch to 4.1 per cent, from 4 per cent previously.

MAS expects headline inflation to average 5.5 per cent to 6.5 per cent, and core inflation, 3.5 per cent to 4.5 per cent, in 2023.

The respondents to the MAS survey kept their overall unemployment rate at 2.2 per cent for the end of 2023, unchanged from the December survey.

However, 56 per cent of the respondents warned that an escalation in geopolitical tensions and inflationary pressures were the two prominent risks to their forecasts.

Meanwhile, spillovers from an external growth slowdown was also ranked in the survey as the top downside risk, by 31 per cent of respondents.

The median of forecasts for various economic sectors in the survey showed manufacturing would not be able to record an expansion in 2023, finance and insurance would grow by 2.5 per cent, and construction would expand by 4.2 per cent.

The wholesale and retail trade sector would likely grow by 1.9 per cent, while accommodation and food services would post growth of 3.2 per cent.

The respondents expect non-oil domestic exports to shrink by 4 per cent in 2023.

For the whole of 2023, 86 per cent of the respondents expect corporate profitability to decline.

At the same time, 57 per cent expect private residential property prices to increase in 2023.

Respondents cited tighter global financial conditions, a stronger US dollar and elevated inflation as the main factors that could potentially weigh on financial markets and lending conditions in Singapore.

However, all respondents identified a slower pace of tightening of global financial conditions, including less aggressive rate hikes by central banks, as an upside driver of domestic financial market and lending conditions.

Respondents also listed capital inflows into Singapore, a weaker trade-weighted Singapore dollar and improved external economic outlook as other potential upside drivers for the market.

However, hopes of less aggressive tightening by the United States Federal Reserve were dashed after chairman Jerome Powell on Tuesday cautioned that US rates are likely to head higher than expected and officials were ready to speed up the pace of hikes if inflation remains hot.

The comments triggered a broad sell-off in US and Asian stock markets and a rally in the US dollar.

Respondents to the MAS survey also expect the Singapore dollar to appreciate to $1.31 against the US dollar in 2023. That is higher than the December survey’s median forecast of $1.34 per US dollar for 2023.

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