Singapore's industrial production to contract by 7.0% in 2023

Expert says the manufacturing sector could remain downbeat for the rest of the year.

Given weak external demand and tight financial conditions stemming from an elevated interest rate environment, an expert from UOB believes that Singapore’s industrial production will contract by 7.0% in 2023.

UOB Senior Economist Alvin Liew said the manufacturing sector could remain downbeat “for the rest of 2023 and into early 2024.”

“The sub-50 reading for electronics PMI reaffirms the assessment that the electronics sector is likely to remain lackluster in the near term, even though the latest NODX and IP readings suggest that the electronics cycle has tentatively bottomed,” Liew said.

Liew, however, underscored that IP in regional electronics and/or semiconductor powerhouses like South Korea and Taiwan continue to see improvement.

“Both South Korea September IP and October exports turned expansionary for the first time since September  2022, with the IP expanding 3.0% YoY (August: -0.7% YoY) while exports surged to 5.1% YoY (September: -4.4%),” Liew said.

“The October S&P Global Manufacturing PMI survey for Taiwan saw an improvement to 47.6 (from 46.4 in September) although still materially below the 50- threshold. However, South Korea’s S&P Global Manufacturing PMI edged lower to 49.8 (from 49.9 in September), implying further caution on the outlook,” Liew added.

Whilst Liew expects Singapore’s IP print to contract by 7.0 in 2023, he underscored that there's a possibility that the contraction could be shallower. 

Meanwhile, UOB retained its 2023 GDP growth forecast at 0.6%, “broadly consistent with MTI’s official assessment that 2023 GDP growth would likely come in at the ‘lower half’ of the 0.5-1.5% range.”