Singapore Economy Avoids Technical Recession in Q2 2023: What Should Investors Know?

July 14, 2023

In a surprising turn of events, Singapore’s economy experienced an unexpected expansion in the second quarter of 2023, successfully averting a looming technical recession.

This development has noteworthy implications for investors seeking potential opportunities in this resilient Southeast Asian market.

According to advanced estimates released by the Ministry of Trade and Industry (MTI), Singapore’s Gross Domestic Product (GDP) rose by 0.7% on a year-on-year (yoy) basis in Q2 2023.

On a quarter-on-quarter (qoq) seasonally-adjusted basis, the economy expanded by 0.3%, a turnaround from the 0.4% contraction in Q1 2023.

Here’s what Singapore investors need to know about this unexpected upturn in the city state’s economy.

1. Robust services sector

The surprise economic expansion was largely driven by robust growth across the services sector, particularly in the accommodation industry.

This sector saw strong growth as a result of a notable recovery in international visitor arrivals.

This could indicate potential growth opportunities for investors in Singapore’s hospitality and travel-related industries.

2. High-profile events on the horizon

Singapore’s event-hosting profile has been bolstered by upcoming concerts, including Taylor Swift and Coldplay, set to attract fans from around the world in early 2024.

These events are expected to provide a significant boost to the local economy.

Investors should keep an eye on industries related to entertainment, tourism, and event management, as these sectors stand to gain from these high-profile events.

I previously wrote about 5 stocks that could benefit from the concert boom in Singapore.

3. Weakness in manufacturing remains

Singapore is not immune to the global economic slowdown, as seen by the weakness in the manufacturing sector.

However, there was a notable improvement, with a slower contraction seen in the manufacturing sector during Q2 2023.

Manufacturing fell 7.5% yoy, after a 5.3% drop in the previous quarter. It was down 1.3% qoq, improving from a 4.5% contraction.

4. Strengthening currency

Following the announcement, the Singapore dollar strengthened against the US dollar, potentially increasing the country’s attractiveness to foreign investors.

This was partly due to the resilient economic growth in Singapore despite the global economic slowdown.

The country’s resilience amid global financial turbulence could provide a relatively stable and promising investment landscape.

5. Positive revision on economic growth projections expected

Previously, the MTI had projected that Singapore’s economy would expand within a 0.5%-2.5% range in 2023.

This estimate is due for revision in August with the finalisation of second-quarter growth numbers.

However, the surprise expansion in the second quarter could be a positive indicator of the annual economic performance, potentially providing investors with better-than-expected economic growth.

Investment opportunities in Singapore

Singapore’s unexpected economic performance in Q2 signals a resilient market with potential investment opportunities, particularly within the services sector and entertainment industry.

However, investors should continue to keep an eye on the evolving global economic situation and its potential impact on the Singapore market.

It is advisable to take a cautious approach and diversify your investments to mitigate risks while capitalising on potential growth opportunities in Singapore’s economy.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

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Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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