Singapore economy grows 1.2 per cent in 2023; growth hurt by softer global demand for its exports

SINGAPORE (AFP): Singapore's economy avoided a recession and expanded 1.2 per cent in 2023, Prime Minister Lee Hsien Loong said Sunday, warning however that geopolitical risks will weigh on next year's growth.

The affluent city-state's economic performance is often seen as a barometer of the global environment because of its reliance on international trade.

"We made 1.2 percent growth this year, avoiding a recession," Lee said in his New Year's message.

For next year, growth is projected to come in at 1.0-3.0 percent "but much will depend on the external environment," he added, pointing to the continuing war in Ukraine and Israel's conflict with Hamas.

The economy has been hurt by softer global demand for its exports, with the return of air travel after the Covid-19 pandemic boosting domestic growth.

"For some years to come, we must expect the external environment to be less favourable to our security and prosperity. Geopolitical uncertainties will continue weighing on the global economy," he said.

"In our own region, there are tensions and risks over rival claims in the South China Sea, and because of the cross-Strait situation. These can affect confidence in the region, and hence our growth."

Maritime tensions have risen recently in the sea after China and the Philippines traded blame for a series of incidents in the area, including a collision between their vessels.

Lee also cited climate change as another challenge for the low-lying island-state.

"We are already feeling its effects," he warned.

"Singapore needs to adapt to and prepare for rising temperatures and sea levels, and to transition our economy to net-zero carbon emissions. It will be costly and demanding."

Lee, who has been prime minister since 2004, called for unity as he prepares to hand over leadership in the coming year to his deputy Lawrence Wong, who is also the finance minister.

"This is not the first time we are having a leadership transition. But transitions are always delicate," he said, adding that Singapore "will come under close scrutiny" on whether it "can remain successful and exceptional".

If Wong takes over, it would be only the second time since Singapore's independence in 1965 that the prime minister is not a member of the Lee family.

Lee's father, Lee Kuan Yew, was the country's first prime minister. - AFP