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Singapore’s GDP projected to expand by 1.4% in 2023, reveals MAS survey

According to the June survey of professional forecasters conducted by the Monetary Authority of Singapore (MAS), Singapore’s gross domestic product (GDP) is expected to expand by 1.4% in 2023. This estimation is lower than the previous forecast of 1.9% made in the previous survey conducted in March.

Based on responses from 26 economists and analysts who participated in the survey, the most probable outcome for Singapore’s economic growth in 2023 is between 1.0% and 1.9%, with an average probability of 45.5%. This represents a decrease of 1 percentage point compared to the previous survey, where the respondents assigned the highest probability to growth rates between 2.0% and 2.9%.

In the current survey, the respondents also anticipate Singapore’s economy to grow by 1.5% in the second quarter of 2023. Additionally, they have projected that Singapore’s CPI-All Items inflation (headline inflation) and MAS Core Inflation will be 5.2% and 4.6% respectively for the same quarter.

The median forecasts for headline and core inflation for the entirety of 2023 remain unchanged from the March survey, standing at 5.0% and 4.1% respectively.

According to a recent survey, market analysts and experts predict that headline inflation for 2023 is likely to fall within the range of 5.0% to 5.4%, an increase from the range of 4.5% to 5.9% projected in March. Core inflation, on the other hand, is still expected to remain between 4.0% and 4.4%, consistent with previous forecasts.

Regarding the labor market, the survey indicates that the unemployment rate is anticipated to be 2.1% by the end of 2023.

Looking ahead to 2024, respondents have maintained their projections from March, forecasting a 2.5% expansion for Singapore’s GDP. The most probable growth outcome is expected to range between 2.0% and 2.9%, with an average assigned probability of 36.1%, slightly higher than the previous 33.2%.

In terms of inflation, headline inflation is forecasted to be 3.3% in 2024, while core inflation is expected to be 3.0%. Respondents assign the highest probability to the range of 3.0% to 3.4% for both headline and core inflation, aligning with the March survey.

The survey also indicates that 67% of respondents anticipate a year-on-year decline in corporate profits for the second quarter of 2023, while 22% expect profits to remain stable during that period.

Furthermore, 44% of respondents predict an increase in private residential property prices in the second quarter of 2023, while 33% expect a decline in property prices.

Moreover, the survey reveals that 63% of respondents believe that Singdollar (SGD) corporate bond spreads will remain stable in the second quarter of 2023, while 25% expect spreads to widen.

Looking at the entire year of 2023, 78% of respondents anticipate a decline in corporate profitability. In terms of private residential property prices, 50% of respondents expect an increase, while 30% foresee a decline.

Additionally, 56% of respondents expect corporate bond spreads to remain stable, while 33% predict that spreads will widen.

Moving to 2024, respondents hold divergent views on corporate profitability, with 38% expecting improvement and another 38% anticipating a decline. As for private residential property prices, 44% of respondents anticipate an increase, and an equal number foresee stable prices.

Furthermore, 38% of respondents expect corporate bond spreads to widen in 2024, while an equal number expect them to remain stable.

Continuing with Singapore’s domestic outlook, 61% of respondents identify spillovers from an external growth slowdown as the most significant downside risk, with 28% ranking it as the top concern. Inflationary pressures and escalation in geopolitical tensions are also flagged as risks to domestic growth.

Conversely, 71% of respondents believe that stronger growth in China, supported by its economic reopening and macroeconomic policy easing, is the most frequently mentioned upside risk to Singapore’s growth outlook, with 29% ranking it as the top factor. Respondents also highlight upside risks from better-than-expected external economic growth and tech cycle recovery.

On a global scale, respondents note that tighter global financial conditions and elevated inflation may continue to impact the financial market and lending conditions in Singapore, with pressures persisting since the March survey.

In contrast, respondents consider less restrictive global financial conditions, including central bank rate cuts, as potential drivers of improvement in the domestic financial market and lending conditions. Capital inflows into Singapore and easing inflation are also mentioned as potential upside drivers.

Regarding Singapore’s monetary policy, none of the respondents expect changes to the slope, width, or level of the S$NEER Policy Band in the scheduled MAS review for October. However, 26% anticipate a reduction in the slope of the S$NEER policy band in April 2024, and 5% expect MAS to lower the level at which the S$NEER policy band is centered.

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