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Singapore cuts 2023 growth forecast to between 0.5 to 1.5% amid gloomy external demand

Amidst global economic challenges, Singapore’s GDP for Q2 2023 grew 0.5% year-on-year. While sectors like manufacturing contracted, construction, trade, and real estate showed resilience. Ministry of Trade and Industry adjusts 2023 GDP growth forecast to “0.5 to 1.5%” in light of current global developments.

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1 year ago

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SINGAPORE: In a move reflecting cautious optimism mixed with heightened global economic concerns, Singapore has narrowed its GDP growth outlook for 2023.

The Ministry of Trade and Industry (MTI) announced on Friday that it expects this year’s gross domestic product (GDP) to be between 0.5 to 1.5 per cent. This is a trimmed forecast from the previously projected range of 0.5 to 2.5 per cent.

According to data released, the nation’s economy registered a 0.5 per cent year-on-year growth in the second quarter, modestly below the initial estimate of 0.7 per cent.

However, this marks a minor uptick from the 0.4 per cent growth observed in the first quarter. On a seasonally-adjusted quarter-on-quarter basis, there was a 0.1 per cent expansion between April and June.

Although this suggests a positive trend reversal from a 0.4 per cent contraction in Q1, it still falls short of the 0.3 per cent advance forecast.

For the first half of 2023, Singapore’s GDP growth averaged a conservative 0.4 per cent year-on-year.

In its latest quarterly report, MTI cited “weak” external demand as the reason for its revised outlook. T

he report pinpointed expected slowdowns in Singapore’s major external economies and a protracted downturn in the global electronics sector. Any signs of recovery in the latter are anticipated only towards the year-end or later.

Global economic uncertainties continue to loom large. Persistent inflation in advanced economies might herald stricter global financial conditions, resulting in reduced global expenditure and exacerbating the current manufacturing slump.

Additionally, the ongoing conflict in Ukraine and mounting geopolitical tensions threaten to disrupt supply chains, diminish consumer and business morale, and impede global trade.

The local manufacturing sector, accounting for approximately 20% of the economy, faces a bleak outlook for the rest of the year.

Main challenges include potential output reductions in the electronics and precision engineering clusters, attributed to the global electronics slump.

The finance and insurance sectors are also forecasted to experience stunted growth due to external economic frailty and stringent financial conditions.

However, not all is grim. MTI highlighted positive trajectories in certain areas, with the aviation and tourism sectors expected to benefit from the resurgence in international air travel and inbound tourism.

Furthermore, consumer sectors like retail trade and food & beverage services will likely see growth, bolstered by a robust labour market and tourism rebound.

In the ministry’s words, “Taking into account the performance of the Singapore economy in the first half of 2023, as well as the latest global and domestic economic developments, MTI has narrowed the GDP growth forecast for 2023 to 0.5 to 1.5 per cent, from 0.5 to 2.5 per cent.”

Sectorial Insights:

  • Manufacturing: A concerning contraction of 7.3 per cent was observed, surpassing the 5.4 per cent shrinkage in Q1.
  • Construction: Remained stable with a growth of 6.8 per cent, reflecting similar patterns from the previous quarter.
  • Wholesale Trade: Demonstrated a promising turnaround with a growth of 1.1 per cent, bouncing back from a 1.7 per cent decline in Q1.
  • Retail Trade: Continued to exhibit positive signs, growing at 2.6 per cent.
  • Transportation & Storage: Witnessed a robust growth of 4.6 per cent, largely influenced by water transport activities and an uptick in cargo handled at Singapore’s ports.
  • Accommodation: Benefited from international visitor arrivals, expanding by an impressive 13.0 per cent.
  • Food & Beverage Services: Moderated growth was seen at 5.7 per cent, influenced by higher sales volumes in cafes, food courts, and fast food outlets.
  • Information & Communications: Reported a growth of 5.0 per cent, however, this was slightly muted compared to 6.5 per cent in Q1.
  • Finance & Insurance: Continued to face challenges with a contraction of 1.7 per cent, which follows the 1.1 per cent decline in Q1.
  • Real Estate: Spurred by private residential property and office spaces, this sector grew by 12.0 per cent.
  • Professional Services: Showed modest growth at 1.7 per cent.
  • Administrative & Support Services: Grew at 6.3 per cent.
  • Other Services Industries: Expanded at 3.8 per cent.
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Economy

IRAS reports S$80.3 billion in tax revenue for FY2023/24, a 17% increase from the previous year

The Inland Revenue Authority of Singapore (IRAS) collected S$80.3 billion in tax revenue for FY2023/24, a 17% increase from the previous year. The rise reflects strong corporate earnings, higher wages, and increased consumer spending, contributing to essential services and economic development.

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2 weeks ago

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4 September 2024

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The Inland Revenue Authority of Singapore (IRAS) reported a total tax revenue collection of S$80.3 billion for the Financial Year (FY) 2023/24, marking a 17% increase from FY2022/23.

The rise is attributed to the country’s strong economic growth and nominal wage increases in 2022.

This revenue constitutes approximately 77.6% of the Singapore Government’s Operating Revenue and 11.9% of the nation’s Gross Domestic Product (GDP). The taxes collected will be used to fund essential services, support social development programmes, grow the economy, and enhance Singapore’s living environment.

In addition to tax collection, IRAS processed close to S$2.3 billion in enterprise grants, benefiting over 131,000 businesses and workers. The arrears rate for Income Tax, Goods and Services Tax (GST), and Property Tax remained low at 0.64%.

Breakdown of Tax Revenue

Corporate Income Tax (CIT) showed the largest increase, rising by 25.6% from S$23.1 billion in FY2022 to S$29.0 billion in FY2023, due to strong corporate earnings. CIT accounted for 36.1% of total revenue collection.

Individual Income Tax (IIT) accounted for 21.8% of the total, with revenue increasing by S$2 billion to S$17.5 billion, driven by higher wages and an increase in the number of taxpayers.

GST contributed 20.7% of the total revenue, with collections rising by S$2.6 billion to S$16.6 billion, a result of higher consumer spending and the increase in the GST rate.

Property Tax contributed 7.4% (S$5.9 billion), and Stamp Duty accounted for 7.2% (S$5.8 billion), though Stamp Duty saw a decline of S$0.1 billion due to lower property transaction volumes.

S$2.3 Billion in Enterprise Grants Processed

IRAS also disbursed S$2.3 billion in grants to support businesses and workers under several schemes, including the Progressive Wage Credit Scheme (PWCS), Senior Employment Credit (SEC), and Jobs Growth Incentive (JGI). These grants were designed to assist businesses in maintaining operations and supporting workers’ employment.

Digital Solutions for Businesses

IRAS continues to enhance digital solutions to facilitate tax compliance for businesses.

Initiatives include:

  • InvoiceNow: This e-invoicing system, set to become mandatory for GST-registered businesses starting in November 2025 for new GST registrants, allows for seamless transmission of invoice data to IRAS for tax administration.
  • One-Stop Payroll (OSP): Developed in collaboration with the Central Provident Fund Board, Ministry of Manpower, and GovTech, this system allows businesses to submit wage-related information to various agencies through a single platform. These initiatives build on IRAS’ existing digital services, such as the Submission of Employment Income API.

To date, over 120 software providers have partnered with IRAS, offering 46 software products designed to simplify tax filing and payments for businesses.

In FY2023/24, it audited and investigated 9,590 cases, recovering approximately S$857 million in taxes and penalties from non-compliant taxpayers.

IRAS aims to ensure timely tax filing and payment while addressing tax avoidance and evasion.

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Economy

Singapore faces 25% increase in bankruptcy filings during first half of 2024

Bankruptcy cases in Singapore surged in the first half of 2024, with 2,334 filings—a 25% increase from 2023. The number of undischarged bankrupts reached 9,903, reflecting ongoing financial challenges and highlighting a rise in bankruptcy orders and applications.

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3 weeks ago

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2 September 2024

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Singapore faces 25% increase in bankruptcy filings during first half of 2024
(photo for illustration purposes only/Unsplash)

SINGAPORE: Bankruptcy cases in Singapore surged in the first half of 2024, with 2,334 individuals filing for bankruptcy—a 25% increase compared to the same period in 2023, according to data from the Ministry of Law (MinLaw).

The rise in filings highlights the ongoing financial challenges faced by many in the country.

The total number of undischarged bankrupts reached 9,903 as of 30 June, marking a 2.4% increase since January.

Additionally, 594 individuals were declared bankrupt between January and June 2024, an 11% rise from the previous year.

May recorded the highest number of bankruptcy applications, with 430 cases, followed by January with 409.

In comparison, May 2023 saw 314 applications, while the highest figure for the first half of 2023 was 356 in March.

Bankruptcy orders also increased, with 595 orders issued in the first half of 2024, compared to 537 during the same period in 2023.

Under Singapore law, individuals with at least S$15,000 (US$11,480) in unpaid debts can file for bankruptcy in the High Court.

The process requires a deposit of S$1,850 (US$1,415) to the Official Assignee for the administration of the bankrupt’s estate.

However, this deposit is non-refundable for those filing for their own bankruptcy. Creditors may recover the deposit if sufficient funds are available in the bankrupt’s estate.

Some cases may qualify for the Debt Repayment Scheme (DRS), an alternative to bankruptcy designed to help debtors repay their debts without filing for insolvency.

The DRS is accessible only through creditors and is available to employed individuals with debts of up to S$150,000 (US$114,807).

Those who qualify must repay their debts in monthly installments over up to five years.

Credit Counselling Singapore (CCS) general manager Tan Huey Min noted that borrowers under the DRS typically repay less than the full amount owed, but once they fulfill their obligations, they can start afresh.

MinLaw cautioned, however, that there is no guarantee of significant debt reduction, and any reduction above 70% would be considered substantial.

Despite the lighter debt burden under the DRS, some individuals still fail to complete their repayment plans.

In such cases, creditors can pursue the remaining debt, which may include filing another bankruptcy application.

Additionally, not all debtors qualify for the DRS, and those deemed unsuitable are declared bankrupt.

Recent reforms in Singapore’s bankruptcy system aim to rehabilitate debtors with clearer discharge timelines

In an interview with Straits Times, Yuen Law associate director Tris Xavier highlighted that prior to 2016, the system lacked clear timelines for discharge from bankruptcy, with some individuals remaining in this state for decades.

The reforms now offer clearer milestones for debtors based on their personal circumstances, making the system more debtor-centric.

First-time bankrupts can be discharged within three to seven years if they meet their target contributions, which typically require 52 monthly payments.

Repeat bankrupts can be discharged within five to nine years, contingent on 76 monthly payments.

Those who fully meet their target contributions will have their names removed from public records five years after discharge, while those who do not will remain on public records permanently.

Xavier emphasized that bankruptcy should not be seen as a way to reduce debt but rather as a financial rehabilitation tool.

He warned against hiding assets, explaining that bankruptcy laws cover both local and overseas assets, and the court can reverse transactions intended to shield assets from creditors.

While CPF savings are protected from creditors during bankruptcy, CPF funds inherited by a bankrupt after death are not.

Additionally, bankrupts face restrictions, including needing permission to travel overseas and being barred from managing a business or acting as a company director.

For those in financial distress, bankruptcy is not the only option.

Xavier advised debtors to communicate openly with creditors as soon as financial difficulties arise.

Credit Counselling Singapore (CCS) also offers a Debt Management Programme that negotiates more affordable repayment terms with creditors.

Unlike the DRS, the CCS program requires full repayment of debts, but it allows individuals to avoid bankruptcy, keeping their financial situation private.

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