- 3Q23 growth was better than advance estimates at 1.1% YoY, 1.4% QoQ sa
- Our nowcast model estimate is pointing to modest growth improvement in 4Q23
- This is in line with slightly better business expectations for the next six months
- Implications for our forecast: We maintain our 2023 and 2024 growth forecasts at 0.9% and 2.2%
- Risks to our baseline view are to the downside from global factors
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Singapore’s 3Q23 economic growth showed nascent signs of stabilisation, which potentially marked the start of a gradual recovery, in our view. November 22’s numbers were better than last month’s advance estimates. 3Q23 real GDP growth, while still below-trend, ticked up to 1.1% YoY, from 1H23’s 0.5% YoY. Sequential growth improved to 1.4% QoQ sa, after stagnating since 4Q22. 3Q23 advance GDP growth was 0.7% YoY and 1.0% QoQ sa.
We maintain our 2023 and 2024 growth forecasts at 0.9% and 2.2%, respectively. Alongside the GDP figures, the Ministry of Trade and Industry (MTI) narrowed its 2023 growth forecast to around 1.0% from 0.5-1.5% previously. It also introduced its 2024 growth forecast range of 1.0-3.0%, while cautioning on significant downside risks. Our projections are largely in line with MTI’s assessment.
Modest improvement ahead
Our in-house nowcast model estimate shows a further modest growth improvement in 4Q23. This is in line with forward indications from the slightly better business expectations survey results for the next six months for October 2023 to March 2024.
Manufacturing, which has been in the doldrums and weak for most of 2023, is a key sector to watch. We continue to expect a gradual and fragile recovery into 2024. 3Q23’s 4.6% YoY contraction was much narrower than 2Q23’s 7.6% YoY drop. Sequentially, manufacturing activity rebounded to expansion of 0.5% QoQ sa in 3Q23, slightly better than the advance estimate of 0.2% QoQ sa, and vs 1H23’s contraction. Manufacturing business expectations for the next six months, which remained positive for the third straight quarter, corroborate with the improving manufacturing purchasing managers’ index (PMI) trend.
The diversified services sector remained resilient overall and buffered the overall economy in 2023. Despite some easing in 3Q23 and unevenness across clusters, overall services expanded for the 11th straight quarter by 2.3% YoY, 1.1% QoQ sa. These were better than advance estimates of 1.9% YoY, 0.7% QoQ sa. Notably, the finance & insurance sector outperformed earlier estimates, rebounding to expansion of 1.5% YoY, 0.9% QoQ sa, instead of contracting. This also reflected some stabilisation vs weakness over the past three quarters. We could see financial services turning up gently, with global central banks closer to pausing their tightening cycles, alongside more supportive base effects. Services business expectations for the next six months for Oct 2023 to Mar 2024 also inch up further and remain positive for the 12th straight reading, highlighting the sector’s resiliency. In fact, no services clusters registered net negative expectations.
Downside risks to our baseline view
While we expect Singapore’s growth to recover gradually in the coming year, the global economic environment remains challenging, and faces downside risks that could derail or delay Singapore’s improvement.
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