Singapore maintains 2024 GDP forecast at 1-3% after economy grew 1.1% last year

SINGAPORE: Singapore has maintained its growth forecast for 2024 at a range of 1 to 3 per cent, as data on Thursday (Feb 15) showed the economy growing slightly slower than expected last year.

The economy expanded by 1.1 per cent in 2023, a whisker below earlier government estimates of 1.2 per cent, said the Ministry of Trade and Industry (MTI) in a quarterly report.

Growth was mainly driven by the services industry, such as the information and communications and transportation and storage sectors, MTI’s Permanent Secretary for development Beh Swan Gin told reporters at a press conference.

For the final quarter of last year, gross domestic product (GDP) grew by 2.2 per cent year-on-year, lower than the projection of 2.8 per cent but accelerating from the 1 per cent growth in the third quarter.

On a quarter-on-quarter seasonally-adjusted basis, the economy expanded by 1.2 per cent, also missing an earlier forecast of 1.7 per cent, but picking up speed from the 1 per cent growth in the previous quarter.

Laying out why it chose to maintain its growth forecast for 2024, MTI noted that Singapore’s external demand outlook has “remained largely unchanged” since its last assessment in November.

Growth in the advanced economies, such as the United States and the Eurozone, is set to slow in the first half of the year, mainly due to continued tight financial conditions, before recovering gradually in line with an expected easing of monetary policy.

On the other hand, regional economies are expected to see a pick-up in growth, partly supported by the turnaround in global electronics demand, MTI wrote in its report.

That said, there continues to be “significant” downside risks in the global economy.

For example, an escalation of the Israel-Hamas conflict or the Russia-Ukraine war could disrupt global supply chains and commodity markets, and in turn weigh on global trade and growth.

There is also the risk of “lagged effects” from monetary policy tightening that could trigger “latent vulnerabilities” in banking and financial systems, and a disruption in the global disinflation process due to “idiosyncratic cost shocks” such as adverse weather events.

Against this backdrop, MTI said Singapore’s manufacturing and trade-related sectors are set for a “gradual pick-up in growth”.

In particular, the electronics and precision engineering clusters within the manufacturing sector are likely to rebound, given a stronger-than-expected recovery in semiconductor sales globally and domestically.

Meanwhile, the machinery, equipment and supplies segment of the wholesale trade sector will benefit from higher external demand for electronic components and telecommunications and computers.

A continued recovery in air travel and tourism demand will support Singapore’s tourism- and aviation-related sectors, such as aerospace and accommodation, as well as consumer-facing sectors such as retail and food and beverage services. 

Still, the pace of growth for most of these sectors is expected to moderate from that in 2023, where they staged a strong recovery following the COVID-19 pandemic, MTI said.

The Monetary Authority of Singapore (MAS) said its monetary policy stance “remains appropriate” and its outlook for core inflation stays “unchanged at this juncture”.

The central bank kept its exchange rate-based monetary policy unchanged last month, standing pat for the third consecutive meeting as inflation lingers.

MAS expects core inflation, which is a key barometer for the central bank, to slow to an average of 2.5 to 3.5 per cent for 2024, down from 4.2 per cent in 2023.

“There are continuing uncertainties on both the growth and inflation fronts … so the MAS will be monitoring quite closely these trends and implications on both inflation and growth. We will review that comprehensively in the next scheduled review in April,” said MAS deputy managing director Edward Robinson.