Singapore trims 2022 GDP growth forecast to 3-4% on global headwinds

Nurluqman Suratman

11-Aug-2022

SINGAPORE (ICIS)–Singapore on Thursday trimmed its 2022 GDP growth forecast to 3-4%, from the previous estimate of 3-5%, due to the deteriorating global economic environment.

“Since May, the global economic environment has deteriorated further,” the Ministry of Trade and Industry (MTI) said in a statement. “Stronger-than-expected inflationary pressures and the more aggressive tightening of monetary policy in response are expected to weigh on growth in major advanced economies such as the US and Eurozone.”

Singapore’s economy grew by 4.4% year on year in the second quarter, faster than the 3.8% expansion recorded in the preceding quarter, according to the MTI.

The final reading on Thursday was lower than the 4.8% GDP advance growth estimate for the second quarter published in July.

On a quarter-on-quarter seasonally adjusted basis, the economy contracted slightly by 0.2%, a reversal from the 0.8% expansion in the first quarter.

MTI data showed that the manufacturing sector expanded by 5.7% year on year in the second quarter, extending the 5.5% growth in the previous quarter, while the construction sector grew by 3.3% from the 2.4% it registered in January to March.

“Singapore’s final Q2 GDP figures came in under their initial estimates. This is the first negative quarter-on-quarter print since Q2 2021,” Singapore-based UOB Global Economics & Markets Research said in a note on Thursday.

Singapore’s official GDP growth forecast range for 2022 was narrowed even as the growth forecast for non-oil domestic exports (NODX) was raised to 5-6%, from the previous forecast of 3-5% issued in May, it added.

Weakening external demand outlook

Further escalations of the Russia-Ukraine conflict could worsen global supply disruptions and exacerbate inflationary pressures through higher food and energy prices, the MTI said.

More persistent and higher-than-expected inflation would dampen global growth further, including through even more aggressive monetary policy tightening in many advanced economies, it said.

The outlook for some outward-oriented sectors in the Singapore economy has also weakened.

“For instance, as China is a key market for petroleum and chemicals products from Singapore, the weakness in its economic outlook has adversely affected the growth prospects of Singapore’s chemicals cluster and the fuels & chemicals segment of the wholesale trade sector,” the MTI said.

On the other hand, the outlook for several sectors in the Singapore economy has improved, with strong recovery in in air passengers and international visitor arrivals is expected to benefit aviation- and tourism-related sectors, it said.

Focus article by Nurluqman Suratman

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