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Singapore’s economy to slow further into 2023 amid global challenges: MAS

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The moderation in global growth and tighter financial conditions will have “some impact” on labor demand, especially in the outwardly-focused manufacturing and modern services sectors, MAS said.

“In particular, the slowdown in global manufacturing demand could hold back domestic sector workforce expansion, given spillover effects across global supply chains, particularly in electronics manufacturing. The demand for labor in externally oriented modern services could also decline,” it added.

But given the “significant wage flexibility” and underlying skilled labor shortages, labor market adjustments in the externally oriented sectors “should be largely through a downturn in job vacancies and wage growth, rather than through large-scale job growth. losses”.

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“Given the starting point of a very tight labor market, overall there could be some scope for a weakening in labor demand and a decline in job openings without a significant increase in resident unemployment,” MAS said.

Companies will continue to hire non-residents to fill the manpower gaps, particularly in sectors such as construction, shipyard and process industries. Coupled with moderating labor demand, the excess labor market tightness should be eased further in the first half of next year.

Accordingly, wage growth is expected to moderate in 2023 but “stay slightly above pre-COVID numbers,” it said.

“While labor supply shortages are expected to ease in the second half of 2022, they should continue to contribute to above-average wage growth, as it takes about three quarters for the effects of a tight labor market on residents’ nominal wage growth to be fully passed on. ” the report said.

Meanwhile, other factors, such as the progressive wage model for low-wage workers, will add “short-term incentives” to wage growth.


As for inflation, the MAS reiterated its projections for core inflation, excluding housing and private transportation costs, which will average around 4 percent this year. Overall headline inflation should be around 6 percent.

This is due to the fact that imported inflation is likely to remain “significant” for a range of goods and services, while a tight labor market will continue to support solid wage increases.

In addition, amid favorable demand conditions, companies are expected to raise prices further to pass on imported and domestic costs that have accumulated within production chains in Singapore and abroad.

The latest data shows that Singapore’s core inflation rose further to 5.3 percent in September, mainly due to larger increases in food, services and retail and other goods prices. That is higher than the 5.1 percent in August.

The general consumer price index, or headline inflation, was 7.5 percent year on year in September, unchanged from August.

Core inflation is expected to remain high in the first half of next year, before moderating “more perceptibly” in the second half, as cost pressures ease and demand conditions weaken, MAS said.

For 2023, taking into account all factors, including an increase in the Goods and Services Tax (GST), core and headline inflation is projected to average between 3.5 and 4.5 percent and 5.5 to 6.5, respectively. per cent.

Excluding the effects of the GST hike, core inflation will be 2.5 to 3.5 percent, while headline inflation will average 4.5 to 5.5 percent.

MAS reiterated that the cumulative effects of its five monetary policy tightening measures since October last year “will help ensure medium-term price stability as the basis for sustainable growth in the economy”.