Singapore upbeat travel boom can cushion economy from recession despite global slowdown woes

GDP declined an annualised 0.4 per cent in the January-March period from the previous three months

The the city does not expect technical recession this year as a rebound in tourism props up growth as well as employment

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Year-on-year, Singapore’s economy grew 0.4 per cent in the first quarter. Photo: Reuters

Published: 9:40am, 25 May 2023Updated: 12:06pm, 25 May 2023

Singapore is confident that a rebound in travel that’s boosting the services sector will help the island’s economy avoid a recession this year despite a darkening global outlook.

Authorities retained their forecast for gross domestic product growth to range between 0.5 per cent and 2.5 per cent, with the actual expansion seen likely coming in at the midpoint. The Ministry of Trade and Industry also published on Thursday final estimates for the first quarter, which showed GDP declined an annualised 0.4 per cent from the previous three months, better than the 0.7 per cent drop estimated earlier.

“We do not expect technical recession this year,” said Yong Yik Wei, MTI’s chief economist. “Given the downside risks and the weakening outlook, we cannot rule out the possibility that there could be some quarters of negative Q-o-Q growth this year. But again, that’s not our baseline,” she said, referring to the sequential performance.

The Singapore dollar traded 0.1 per cent lower against the US dollar, as the local currency looked past the marginally better-than-expected final first quarter GDP figure.

While the ministry acknowledged that downside risks in the global economy have risen and they could weigh more heavily on consumption and business investments, Yong said the services sector continues to be resilient and should lend some support to growth as well as to employment.

The outlook for aviation and tourism sectors remains sanguine, boosting transport, hotels, entertainment and recreation, the ministry said.

The growth view comes despite a deteriorating global demand outlook, with the US economy exposed to potential strain from a stand-off in debt ceiling talks that prompted a rare negative rating watch on the world’s largest economy by Fitch Ratings. Also, weaker-than-expected economic data from China have meant that the growth boost expected from the reopening of the world’s No 2 economy are yet to fully materialise.