During the 2nd quarter, the economic growth of Singapore was slightly higher than expectations. The reason behind this jump in growth is the resilience of the service industry and construction activity. Together, these two sectors managed to offset the decline in manufacturing activity.
From the period between April to June, Singapore's GDP increased by 0.7% annually, which was even higher than the estimates made by the Ministry of Trade & Industry. Overall, the growth during Q2 was higher than the growth during the 1st quarter.
When compared with the Q1, an increase of 0.3% happened during the 2nd quarter. What's more interesting is that this economic growth comes at a time when Singapore is struggling to avoid a technical recession.
Local Construction Activity Fueled The Growth
During Q2, a jump of 6.6% was witnessed in the local construction activity which ended up supporting Singapore's economy. At the same time, growth from IT services, retail trade, and accommodation also helped in spurring growth in the economy.
In addition, China's reopening of the borders led to an increase in tourism in Singapore. So that's yet another sector that is supporting the economy. Looking ahead, international arrivals in Singapore will also increase during Q3 and Q4.
However, the export and manufacturing sector of Singapore was plagued by slow demand, especially from China (one of the major trading partners). Similarly, the manufacturing sector of Singapore declined 7.5% on a YoY basis during Q2.
According to estimates, the GDP of Singapore will grow by 0.5% - 2.5% during the year 2023. Last year, the economic growth in Singapore was 2.1% which was slower than expectations.
In 2022, the non-oil exports of the country shrank and will likely remain depressed during the next few months as well. If we look around, the Chinese economy is running out of steam which is also putting pressure on Singapore.
One key factor that supports the idea of strong growth in Singapore is the stimulus packages expected from China. If this happens, the Chinese economy will pick pace which will also support other Southeast Asian countries like Singapore.