Last week, Singapore reported weak economic numbers raising fears of a recession. Annual exports fell for the eighth consecutive month while total employment expanded slower, retrenchments rose, and job vacancies shrank for the fourth quarter. The Singapore economy has been primarily export-driven for decades. That has helped it achieve a high GDP per capita, one of the world’s highest. But now, it’s facing headwinds from slowing global growth and rising inflation pressures. The Monetary Authority of Singapore (MAS) left its monetary policy settings unchanged last week. This is the first time it hasn’t changed its key interest rate in more than a year.
In its latest economic update, the MAS pointed to the need for further fiscal consolidation, which would require lower wages and salary increases. It also warned that the global economy still faces “increasing risks and challenges.”
The MAS also flagged weak domestic demand as it lowered its growth projection for this year to 0.5 percent. The forecast is a sharp cut from its previous estimate of 2.8 percent and marks the lowest growth rate in a decade. The slowdown is due to higher global oil prices and a continuing slump in electronics manufacturing, Singapore’s leading export sector.
Non-oil domestic exports (NODX) slumped 14.7 percent in May, following a fall of 9.8 percent in April. Services-producing industries comprised half of NODX and saw their output fall 6.6 percent. The decline was more significant than economists had expected.
According to a report from the Ministry of Manpower, total employment (excluding foreign domestic workers) in Singapore rose in the first quarter of 2023. However, it remained below pre-pandemic levels. Resident employment saw growth in financial services, public administration and education, and professional and health & social services. But employment in retail trade and food & beverage services declined as hiring for festivities ended.
In the non-resident segment, employment grew by 1.7% in Q1 2023 compared to a year earlier. It was the first time that the number of non-residents employed in Singapore surpassed pre-pandemic levels. The increase could result from companies bringing in more foreign professionals, says RHB senior economist Barnabas Gan.
While some weak short-term labor market data could raise concerns about the risk of a technical recession, the Singapore economy is likely to continue its gradual recovery. The city-state’s strengths – such as its strategic location, advanced connectivity, a highly-efficient infrastructure, and Gigabit fiber-optic communications networks – remain attractive to international businesses. In addition, its pro-business and open immigration policies ensure a steady supply of skilled workers. Its low corporate taxes and tax-free environment are also a draw for multinationals operating in Asia.
