McKinsey sees Singapore’s manufacturing constrained, services resilient

Advanced estimates showed GDP grew 1.2% in 2023.

Even after growing faster than expected last year, Singapore’s economy may continue to face challenges with a sluggish global demand threatening its manufacturing sector, according to McKinsey & Company.

McKinsey noted in its latest regional economic overview that the city-state has been struggling with a severe slowdown in manufacturing activity and key exports for more than a year now, especially in electronics.

“The near-term outlook (on the sector) is expected to remain constrained by slow demand in several important export markets for Singapore's manufacturers, notably China and the European Union (EU),” the global management consulting firm said in the report released on 15 December. 

Bright spots, however, emerge in the economy’s services sector which is expected to stay more resilient thanks to strong rebound of international tourism in Asia Pacific.

Advanced estimates from the Ministry of Trade and Industry last week showed Singapore’s gross domestic product rose 1.2% last year, faster than the state’s 1% growth forecast but still slower than the actual 3.6% growth rate in 2022.

READ MORE: GDP up 1.2% in 2023: MTI

McKinsey highlighted how the services sector served as a key growth driver in the third quarter following the surge of visitor arrivals last year.

Tempering economic growth was its sluggish manufacturing sector with output still down year on year in the third quarter. 

Sticky inflation and the uncertain geopolitical landscape also continue to pose risks to Singapore’s economic outlook, it added.