Southeast Asian city-states have received a warning of rising “downside risks” as interest rates rise and the war in Ukraine escalates. Although these city-states performed better than expected in the first quarter, they fell short of recording the 2.1% growth recorded in the previous quarter. The Ministry of Trade and Industry (MTI) left its 2023 growth forecast unchanged at 0.5% to 2.5%. However, the ministry warned of rising downside risks such as rising interest rates and the escalation of the war in Ukraine.
Singapore, a major financial hub heavily dependent on trade, is often considered a barometer of the global economy due to its exposure to international affairs. On Thursday, the Permanent Secretary of the Department of Trade, Gabriel Lim, stated that the demand outlook for 2023 had deteriorated, and Singapore’s external demand outlook weakened for the rest of the year. He said, “Apart from the expected slowdown in advanced economies, the electronics downcycle is likely to be more severe and prolonged than previously projected.”
In 2022, Singapore’s economy grew by 3.8%, down from 7.6% the previous year, due to a boost in activity. The ministry predicts that this year’s growth rate is likely to be in the middle of the forecast range. The warning of rising downside risks highlights the potential challenges that the city-states could face in the future, emphasizing the need for strategic planning and effective policy-making.