Singapore’s preliminary 2Q23 GDP came in at 0.3% q/q SA, 0.7% y/y, better than Bloomberg’s and our more bearish forecasts. It was noted that the 1Q GDP growth was unchanged from the previous reading of 0.4% y/y (-0.4% q/q). While the growth outcome was soft, 2Q did manage to avoid another sequential contraction, which means Singapore have avoided a technical recession in 1H 2023.

Growth in 2Q continued to be dragged by the weakness in manufacturing (-1.3% q/q, -7.5% y/y in 2Q from -4.5% q/q, -5.3% y/y in 1Q) while services sector anchored growth as it picked up pace to 1.3% q/q, 3.0% y/y in 2Q (from 0.4% q/q, 1.8% y/y in 1Q) and construction activity also rose by 2.6% q/q, 6.6% y/y (from 0.3% q/q, 6.9% y/y in 1Q). 

For now, we are keeping our more conservative GDP growth forecast of 0.7% in 2023, which is near the lower end of the official growth forecast range of 0.52.5%, reflecting our more cautious external and manufacturing outlook while the downtrend in the electronics sector has yet to find a bottom in the current cycle. We still think Singapore is not out of the woods yet in terms of the risk of a technical recession in 1H 2023, especially if the contraction in Jun manufacturing turns out much worse than MTI’s (implied) projection.  

Based on MTI’s advance estimates, Singapore’s manufacturing sector contracted by -7.5% y/y in 2Q. Factoring the 6.5% y/y and 10.8% y/y contractions for industrial production in Apr and May, this implies that MTI expects the manufacturing sector to contract by a smaller -5.2% y/y in Jun. However, as we think that manufacturing may contract in excess of 10% in Jun, the risk of 2Q GDP’s 0.3% q/q growth being revised into negative territory is quite high.