, Singapore
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Retail sales momentum to decelerate into 1H23

RHB expects full-year retail growth to clock in at 6.0%. 

Experts believe retail sales will continue to slow in 2023, following its "big miss" in January.

"We expect retail sales momentum to decelerate into 1H23, considering the dissipation of front-loading buying in 2022," RHB Senior Economist, Barnabas Gan, said. 

Gan added that domestic demand will likely be softer in 2023 due to three factors.

"First, retail demand will slow as demand fatigue may be seen in response to the front-loading retail behaviour seen in 4Q22," Gan said.

The expert added that retail demand will also slow in tandem with easing GDP growth momentum across Asia and Singapore, which, in turn, would dissuade domestic expenditure, especially in the first half of the year (1H23).

“Third, retail sales growth had been robust in 2022, suggesting that 2023’s growth must contend with the high base prints,” Gan said.

Apart from domestically-induced factors, Gan said retail sales will also likely be affected by global uncertainties.

UOB Senior Economist  Alvin Liew had a similar sentiment, saying that still-elevated inflation pressures will remain a key downside risk to retail sales in 2023.

“[This] may increasingly curb discretionary spending of households, in addition to the 1ppt GST hike,” Liew said.

“The low base effect is also likely to fade going into the new year, rendering less uplift,” he added.

On the flip side, Liew said China’s border reopening will bode well for Singapore’s travel- and tourism-related sectors including retail.

“We expect to see a significant influx of Chinese tourists and their related spending in the subsequent months,” Liew said.

ING Senior Economist Nicholas Mapa and Gan had the same sentiment.

"The reopening of China, however, could be a potential positive for Singapore should this translate to increased trade activity and also bolster tourist arrivals further," Mapa said.

“China remains a crucial tourism source in Singapore and throughout Asia. As such, the recovering inbound tourism may continue to support Singapore’s hospitality industries, including food & beverages and other discretionary items,” Gan commented.

Given the upside and downside risks, Gan expects retail sales growth in 2023 to clock in at 6.0%. Liew and Mapa had lower estimates of 5.0% and 2.4%, respectively.

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