GDP estimates lowered following manufacturing sector slowdown

Analysts now predict 2022 GDP growth to settle at 3.2% YoY from 3.5% YoY.

Analysts have lowered their expectations for full-year and Q2 economic growth following the manufacturing slowdown in June.

In June, manufacturing output fell below market expectations, increasing only by 2.2% YoY. Comparing the June record to May, manufacturing output declined by 8.5%.

As manufacturing is part of the three major factors contributing to Singapore's economic growth, UOB said Q2 GDP growth will likely be lowered by 0.3 percentage points to 4.5% YoY from the previous forecast of 4.8 YoY.

RHB echoed this adding that  the adjustment of Singapore’s manufacturing performance in 1Q22 and 2Q22 alone suggests that GDP will grow at a slower pace." RHB estimates Q2 GDP growth to come in at 4.4% YoY.

For the full year, RHB expects GDP growth to be 3.2% YoY, lower than its original forecast of 3.5% and the Bloomberg consensus estimate of 3.9%.

"The reason for the downgrade is due to the momentum of industrial production (IP) in 1H22 slowing at a faster rate than we expected," RHB  explained.

In the second half of 2022, RHB said it expects a further slowdown in industrial production.

Factors affecting the slowdown include the cooling global trade demand and higher supply costs, the China economic slowdown, Russia-Ukraine tensions and tighter monetary policies across the developed economies.