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Singapore’s economic growth exceeded government expectations last year as services grew despite an industrial downturn.

Gross domestic product grew by 3.8 percent in 2022, beating the official estimate of 3.5 percent, but well below the 7.6 percent growth in 2021.

The city-state economy grew 2.2 percent year-on-year in the fourth quarter of 2022, down from the 4.2 percent growth in the previous quarter, the Ministry of Commerce and Industry noted. Seasonally adjusted, the economy expanded 0.2 percent on a quarterly basis.

“We think growth is likely to weaken further,” said Shivan Tandon, emerging Asian economist at Capital Economics. He said Singapore’s exports were likely to decline if the global economy entered a recession in 2023.

“Higher interest rates, lower household savings and higher inflation rates are likely to affect domestic demand,” Tandon added. “We do not expect further monetary tightening from the Monetary Authority of Singapore.”

The manufacturing sector in the Southeast Asian country contracted 3 percent year on year in the fourth quarter, a reversal of the 1.4 percent growth in the previous quarter.

“This came against the backdrop of production contractions in the electronics, chemicals and biomedical manufacturing groups, which outweighed the expansion of production in the precision engineering, transportation engineering and general manufacturing groups,” the ministry said.

The construction sector grew 10.4 percent year-on-year in the fourth quarter, accelerating from 7.8 percent in the previous quarter. “Construction production in the public and private sectors continued to recover,” the ministry said.

Services grew 2.3 percent year over year in the fourth quarter, slower than the 5.7 percent growth in the previous quarter.