Singapore: A recession in Q1 nonetheless seems on the playing cards – UOB

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Senior Economist at UOB Group Alvin Liew assesses the most recent GDP figures for the January-March interval in Singapore.

Key Takeaways

“Singapore’s ultimate 1Q23 GDP progress coming in at 0.4% y/y (-0.4% q/q SAAR) revised up from the prelim estimate of 0.1% y/y (-0.7% q/q SA), in comparison with the two.1% y/y (+0.1% q/q) progress in 4Q22. Regardless of the revision, 1Q’s y/y progress was nonetheless the weakest since 1Q 2021. It was, nevertheless, larger than our and Bloomberg median estimate of 0.2% y/y, -0.6% q/q.”

“Progress was dragged by manufacturing sector (-4.8% q/q, -5.6% y/y) in 1Q with all main sectors inside manufacturing recording declines in output besides transport engineering. Companies supported progress with aviation- and tourism associated sectors outperforming however trade-related providers weighed on progress. Building exercise supported progress though its 1Q tempo was revised decrease.”

“The MTI of their outlook, was extra downbeat in regards to the US and Europe however extra constructive on China (seeing its restoration to be stronger than anticipated whereas noting the draw back dangers). MTI additionally warned of a extra extended and deeper electronics downturn and highlighted two rising draw back dangers to the worldwide economic system: 1) tightening of worldwide monetary circumstances and a pair of) escalations within the Russia-Ukraine struggle and geopolitical tensions amongst main world powers. The MTI maintained its earlier forecast for the Singapore economic system to develop by 0.5-2.5% in 2023, including that progress will probably be within the mid-point of the vary (i.e. 1.5%). As compared, we nonetheless anticipate full yr GDP progress at 0.7% in 2023 (decrease finish of the official progress forecast vary) reflecting our extra cautious exterior outlook. There’s a substantial threat Singapore might enter a technical recession in 1H 2023, largely pushed by the weak point in manufacturing.”

“Singapore’s headline inflation rose to five.7% y/y in Apr from 5.5% y/y in Mar. The core inflation remained elevated at 5.0% y/y (unchanged from Mar). The MAS saved its inflation forecasts (that had been first made within the 14 Oct 2022 MPS) unchanged within the Apr CPI report and mentioned core inflation price will stay ‘elevated within the subsequent few months’ however ‘will stay on a broad moderating path’ and ‘to sluggish extra discernibly within the second half of the yr’. Nonetheless, the MAS omitted the earlier point out that ‘MAS Core Inflation is projected to succeed in round 2.5% y-o-y by the tip of 2023’.”

“MAS Outlook – Conserving Our View Of Standing Quo For Oct 2023: Whereas inflation considerations remained within the newest Apr inflation print, it was additionally evident that the expansion outlook has been additionally topic to larger uncertainty and biased to the weaker aspect. That mentioned, it’s also too quickly to anticipate financial coverage to reverse a part of its restrictive stance given the stickiness of core inflation. On the steadiness of sticky Apr inflation and a weaker progress outlook, we maintain the view that the tightening cycle to have led to Apr and the MAS to take care of this pause within the subsequent Oct assembly. If there’s one other off-cycle announcement earlier than Oct, we expect it should probably be as a result of a sudden worsening in exterior circumstances resulting in a pointy downgrade in progress outlook, so the MAS will probably shift to a extra accommodative coverage slightly than additional tightening in its subsequent transfer, however that isn’t our base case to anticipate an off-cycle coverage announcement for now.”