Singapore avoids recession as Lee Hsien Loong warns of ‘troubled’ world

Singapore avoids recession as Lee Hsien Loong warns of ‘troubled’ world

Singapore’s economy avoided a recession in 2023 as Prime Minister Lee Hsien Loong warned of a “troubled” international environment that will weigh on growth and security.

Gross domestic product expanded 1.2%, Lee said in his New Year’s message, compared with the trade ministry’s forecast in November for an expansion of around 1%. For 2024, he reiterated an official projection for growth of 1% to 3%.

Lee called 2023 a “challenging year” where tensions between the US and China remain and the war in Ukraine is at a “strategic stalemate with no resolution in sight.” He pointed to global “revulsion and anger” over the human suffering in the Israel-Hamas conflict.

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

Lee, 71, has served as prime minister since 2004 and plans to hand over the reins to his deputy Lawrence Wong in 2024. In what is likely to be his final New Year’s message, he urged Singaporeans to extend their full support to the new leadership.

“This is not the first time we are having a leadership transition,” he said. “But transitions are always delicate. Singapore will come under close scrutiny. People near and far are watching to see how the new leaders bond with Singaporeans, and whether our small nation can remain successful and exceptional.”

Under Lee, Singapore’s per capita income has risen from about $27,600 in 2004 to $87,880 in 2023, making the tiny island nation one of the world’s richest places.

He has presided over one of the world’s most competitive economies, while helping the city state navigate the global financial crisis and the Covid-19 pandemic, and forge stronger relations with major powers such as the US and China as well as neighbors Malaysia and Indonesia.

Singapore’s outlook depends on a durable recovery in global trade, given that exports are equivalent to more than one-and-a-half times the size of the island’s economy. Although overseas shipments swung to growth for the first time in 14 months in November, gains were largely on account of a low year-ago base.

Lee said that while the economy grew in 2023, households are still feeling the pressure of higher costs of living even though inflation is gradually easing.

Taming inflation has been a top priority for policymakers since the city-state’s reopening post-pandemic. The government has announced support measures worth billions of dollars, while the central bank has kept the local dollar on an appreciating path to blunt imported inflation.

A 1 percentage point increase in the goods and services tax to 9% from Jan. 1 will add to price pressures, even as the premier said the extra revenue will help the government pay for growing healthcare expenses. Authorities will continue to provide monetary assistance and subsidies to cushion the impact, he said.