Tourism demand to improve retail sales momentum in 2H23: experts

In May, retail sales growth decelerated to 1.8% YoY.

Experts believe Singapore’s retail sales will improve in the second half of the year after a slowdown in the first quarter.

In a report, RHB said tourism demand, albeit limited due to China’s cautious prognosis, should lift retail sales moving forward.
Notwithstanding the limited tourism demand support, RHB said the low-base effects may benefit 3Q23’s retail growth. 

“Retail sales momentum slowed for most of 2H22, as the pent-up demand from the gradual reopening of post-pandemic conditions waned over the same period. However, some pick-up in retail sales towards 4Q22 was seen as consumers likely front-loaded purchases before the increase in the Goods & Services Tax (GST) of 1.0% to 8.0% effective 1 Jan 2023.” RHB said.

“We continue to expect a similar phenomenon in 4Q23; GST rates are scheduled to increase to 9.0% effective 1 Jan 2024, and some front-loading of purchases could be seen again in 4Q23 in a similar fashion,” RHB added.

Other factors that may continue to support retail sales in 2H23 include the forecast improvement in the GDP momentum in the second half.

“Several seasonal factors such as the F1 race (September), Black Friday and Single’s Day (November) and festivals (typically in December) will especially lead retail sales higher given the accelerating tourism arrivals already seen year-to-date,” RHB added.

UOB had a similar sentiment, saying domestic retailers will continue to enjoy domestic and external support, “complemented by major events such as various sports, high profile concerts and BTMICE (Business Travel and Meetings, Incentive Travel, Conventions and Exhibitions) activities.” 
Meanwhile, strong employment and wage growth conditions in Singapore will likely contribute further to domestic consumption demand, said UOB.

RHB, however, warned that uncertainties surrounding global geopolitical tensions and pandemic-related risks remain. “|Any worsening of these risks may re-exacerbate regional economic slowdown and re-introduce travel restrictions,” the expert said.

UOB said the slower-than-expected return of inbound Chinese tourists also remains a concern, “but may well be a potential uplift in 2H 2023/early 2024 if there will be a significant influx of Chinese tourists and their related spending in the subsequent months.
Given these factors, UOB kept its 2023 retail sales growth forecast at 5.0%