Singapore upgrades 2024 economic growth forecast to around 3.5%

SINGAPORE: Singapore on Friday (Nov 22) upgraded its economic growth forecast for 2024 to around 3.5 per cent, above the range of its previous prediction.

In August, the Ministry of Trade and Industry (MTI) narrowed the gross domestic product (GDP) growth forecast to 2 per cent to 3 per cent.

MTI upgraded the 2024 forecast after taking into account the "better-than-expected performance" of the Singapore economy in the first three quarters of the year, as well as the latest global and domestic situations. 

For the first three quarters of the year, GDP growth averaged 3.8 per cent compared with the same period a year ago.

In response to CNA's question on whether GDP growth for the full year could exceed the forecast, MTI's permanent secretary for development Beh Swan Gin said the ministry did moderate its forecast.

"We are not ruling out that the number could be higher than 3.5 per cent," he told reporters.

The ministry is expecting Singapore's 2025 GDP growth to come in between 1 per cent and 3 per cent.

Singapore's economy grew 5.4 per cent in the third quarter of this year, up from the advanced estimates of 4.1 per cent.

OUTLOOK FOR 2024

On balance, Singapore’s overall external demand outlook is expected to remain resilient for the rest of 2024, said the ministry.

Coupled with the ongoing recovery in global electronics demand, this should support growth in Singapore’s manufacturing sector as well as outward-oriented services sectors such as the wholesale trade sector, added MTI.

However, the outlook for tourism-related and consumer-facing sectors such as accommodation, retail trade and food and beverage services has weakened given the slower-than-expected recovery in international visitor arrivals and sluggish tourist spending. 

Dr Beh also highlighted the "sustained local travel outwards" as having an effect on these sectors.

Major economies such as the US and Eurozone, as well as some regional economies, including Malaysia, performed better than projected in the third quarter of the year.

This was mainly due to stronger-than-expected consumption growth in these economies.

However, China's GDP growth has continued to slow, in line with expectations over the same period.

For the rest of the year, US’ GDP growth is expected to moderate as consumption growth weakens with gradually easing labour market conditions.

GDP growth in the Eurozone is also projected to be modest, weighed down by subdued industrial activity and investments.

By contrast, China’s economy is projected to pick up slightly on the back of government support measures that were recently announced.

GROWTH DRIVERS IN Q3

Singapore's 5.4 per cent growth in the third quarter is up from the 3 per cent growth recorded in the second quarter.

The growth was higher than a median forecast of 4.6 per cent in a Reuters poll of economists.

On a quarter-on-quarter seasonally adjusted basis, Singapore's economy grew by 3.2 per cent, accelerating from the 0.5 per cent expansion in the previous quarter.

Manufacturing, wholesale trade and finance and insurance boosted GDP growth in the third quarter, MTI said. These sectors were bolstered in part by the upturn in the global electronics sector.

In particular, the manufacturing sector expanded by 11 per cent year-on-year, reversing the 1.1 per cent contraction in the previous quarter.

All clusters in the sector grew, but the electronics cluster reported robust growth, supported by demand for smartphone and PC semiconductor chips.

On a quarter-on-quarter seasonally adjusted basis, the sector grew 13.5 per cent, a reversal from the 1.1 per cent contraction in the second quarter.

Dr Beh said there was an upturn in semiconductor output due to demand, and noted that the sector is "fairly significant" in Singapore. "There's also spillover to the precision engineering industry, for instance the industrial machinery, semiconductor equipment and so on," he said.

The finance and insurance sector extended gains, growing 5.4 per cent year-on-year, compared with the 6.4 per cent growth in the second quarter.

The wholesale trade sector grew by 4.9 per cent compared with the same period last year, similar to the 4.8 per cent in the preceding quarter.

2025 OUTLOOK

Overall GDP growth in Singapore’s key trading partners is expected to ease slightly in 2025 from this year's level, said MTI.

In particular, GDP growth in the US is likely to moderate as labour market conditions continue to ease, said Dr Beh. This will lead to a slowdown in consumption growth, although MTI said investment growth should provide some support.

By contrast, GDP growth in the Eurozone is likely to pick up as monetary policy becomes more accommodative, which will lead to a gradual recovery in investments and stronger consumption growth, he said.

In Asia, China’s GDP growth is projected to moderate in line with weaker export growth due to tariff hikes that have already been announced.

However, the slowdown in economic growth is likely to be cushioned by a "modest recovery" in domestic consumption as consumer sentiments improve alongside a stabilisation of the property market.

MTI said key Southeast Asian economies should see steady growth, driven in part by the upswing in global electronics demand.

"Nonetheless, global economic uncertainties have increased, including uncertainty over the policies of the incoming US administration, with the risks tilted to the downside," said MTI.

Dr Beh noted that the incoming US administration has signalled that it is strongly considering tariff hikes. If they happen, there could be renewed inflationary pressures that could affect the pace of monetary policy easing.

That would keep financial conditions in the US tighter for longer and could also trigger retaliatory trade policies from US trade partners, he said, adding that these are two immediate outcomes that MTI is monitoring closely.

"To try and speculate beyond that will be a little bit difficult, and to include all that in the forecast for the year ahead ... the cone of uncertainty is too wide for us to do that," he said.

MTI cited geopolitical conflicts, including in the Middle East, as well as trade tensions among major economies, that could lead to higher oil prices and production costs, as well as greater policy uncertainty.

In turn, this could lead to a decline in global investment and trade, and weigh on global growth.

"Disruptions to the global disinflation process could lead to tighter financial conditions for longer and the desynchronisation of monetary policies across economies, potentially triggering latent vulnerabilities in financial systems," added the ministry.

However, the growth outlook of the manufacturing and trade-related services sectors in Singapore remains positive, said MTI. The electronics cluster is projected to continue its expansion, supported by strong demand for semiconductor chips in end markets such as PCs and smartphones.

Outward-oriented services sectors such as the information and communications, as well as finance and insurance sectors are projected to register healthy growth amid sustained enterprise demand for digital solutions and services and favourable financial conditions respectively.