Singapore’s economic growth momentum to slow further in 2023, says DBS Research

KUALA LUMPUR (Nov 29): DBS Group Research said it expects Singapore’s economic growth momentum to slow further in 2023.

In an economics and strategy note on Singapore’s 2023 outlook, DBS Research said growth in the fourth quarter could potentially fall below 2% year-on-year (y-o-y), with risk of another sequential decline due to further drag from the manufacturing sector.

It said the latest October 2022 non-oil domestic export figures are a good bellwether.

DBS Research said the headline number dipped into the red (-5.6% y-o-y) for the first time in almost two years, drag by poor electronics export sales (-9.3%) and a deep 32% decline in exports to China.

Technical recession

“We expect the growth performance to slow to 2.2% in 2023, and a technical recession within the next three quarters should not be discounted,” it said.

DBS Research senior economist Irvin Seah said Singapore’s economy started 2022 on a high note on the back of a solid showing in the previous year, rising vaccination and further easing of Covid-19 measures.

“However, a slowdown in China, a pickup in inflationary pressure with the resulting tighter monetary policies, and the Ukraine war have dampened the economic performance.

“Optimism at the start of the year soon faded and risk aversion soon set in,” he said.


Seah said growth momentum in the sector is waning due to China’s slowdown, a decline in global electronics demand, and tighter liquidity conditions.

He said China’s unwinding of Covid-19 measures in 2023 will be pivotal, but rhetoric is still hawkish.

“A gradual and calibrated approach to the normalisation process can be expected in the coming quarters.

“If further easing of China’s Covid-19 measures do pan out, the pent-up demand could be significant for the region.

“That said, China’s Covid-19 policy is a wild card, and we prefer to take a cautious view for now given the high degree of uncertainty,” said Seah.

Meanwhile, Seah said that after five rounds of tightening by the Monetary Authority of Singapore, and visible signs of global inflationary pressure abating, price pressure within Singapore appears to be easing.

He said consumer price index (CPI) inflation had peaked, with the latest October reading dipping to 6.7%.

“Going forward, while the base effect and the knock-on impact of slower growth on demand and the labour market could make for lower inflation readings, a one-percentage-point hike in the goods and services tax to 8% in January 2023 will offset the trajectory of inflation readings for the full year.

“We expect headline CPI inflation to average 6.3% in 2023, with core inflation for the full year likely to come in at 4.2%,” he said.