Singapore: On track for 2%+ growth in 2024
Singapore’s economy is on track for 2%+ growth in 2024, but faces lingering downside global risks.
Group Research - Econs, Chua Han Teng23 May 2024
  • 1Q24 GDP growth was unchanged vs advance estimates…
  • …cooling to 0.1% QoQ sa, but rose 2.7% YoY, helped by favourable base effects.
  • Manufacturing is poised for a fragile recovery in 2024, after a weak 1Q24.
  • External-oriented services should support 2024’s recovery.
  • Implications for our forecast: We maintain our 2024 growth forecast at 2.2%.
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We continue to expect better Singapore economic growth prospects in 2024 vs a muted 2023, following steady 1Q24 data vs earlier advance estimates (AE). May 23’s release confirmed 1Q24 real GDP cool sequentially to 0.1% QoQ sa, the lowest print since early-2023. Yet, favourable base effects supported 1Q24 real GDP growth of 2.7% YoY vs 4Q23’s 2.2% YoY. 1Q24’s steady headline growth rate vs AE was due to stronger services expansion, which offset downward revisions in manufacturing and construction.

We maintain our 2024 real GDP growth forecast at 2.2% vs 2023’s 1.1%, which factors in improving sequential QoQ sa expansion, and ongoing global uncertainties. Singapore’s growth recovery will be mainly supported by a gradual improvement in external-led sectors. Our 2024 growth forecast remains within the Ministry of Trade and Industry (MTI)’s unchanged 1-3% growth forecast range.

The MTI highlighted three downside risks to the global economy: 1) escalations in geopolitical tensions that could disrupt global supply chains and commodity markets, 2) tighter financial conditions from disruptions to the global disinflation process, and 3) greater volatility in capital flows and currency fluctuations from emerging markets vulnerabilities.

Tech upturn key to manufacturing recovery

Singapore’s manufacturing sector remains poised for a fragile recovery in 2024, from 1Q24’s lacklustre and uneven performance, in our view. Forward-looking indicators point to a recovery from 1Q24’s weakness. Manufacturing companies are positive on business prospects for the six-month period April to September 2024 across all clusters, according to the Economic Development Board (EDB)’s business expectations survey. This is on top of the continuous expansion in Singapore’s headline and electronics manufacturing purchasing managers indices (PMI) as of April 2024.

External-oriented services to be supportive

Singapore’s diversified services sector was a key source of support to the overall economy in 1Q24. 1Q24 services growth strengthened to 3.9% YoY and 1.9% QoQ, offsetting the weakness in the manufacturing sector. The significant boost from travel-related services in 1Q24 was likely one-off, and improvements in external-oriented services activity will be crucial for Singapore’s economic growth recovery in 2024.

Travel-related services stood out in 1Q24, with a strong growth rebound of 10.1% QoQ sa and 14.4% YoY, from 4Q23’s 3.1% QoQ sa drop and 1.5% YoY expansion. We expect travel-related services to be in expansion, but tapered vs 1Q24’s outstanding performance. Firstly, the cluster should benefit from forthcoming inbound tourists, amid a decent event pipeline for the rest of 2024, including September’s Singapore Grand Prix. Yet, 1Q24’s significant boost from specific high-profile concerts is likely to be one-off. Second, the ongoing recovery in Chinese tourists should also support travel-related services activity. Overall visitor arrivals look on track to meet Singapore Tourism Board’s upwardly revised 15.0-16.5mn forecast for 2024.

Singapore’s economic recovery in 2024 will hinge on the performance of external-oriented services clusters, which have been an increasingly important part of the overall economy. The trade-related services cluster collectively expanded by 3.1% YoY in 1Q24 vs 4Q23’s 1.0% YoY. We expect trade-related services to be supported by Singapore’s modest manufacturing and global trade recovery.

The modern services cluster (comprising of Information & Communications, Finance & Insurance, and Professional Services) collectively rose by 5.5% YoY in 1Q24 from 4Q23’s 3.7% YoY, with some support from favourable base effects. Sequential QoQ sa momentum cooled in 1Q24, but we expect some improvement in the subsequent quarters. We expect information & communications services to benefit from digitalisation efforts and demand. Financial services should also improve sequentially, with an uptick in credit demand, given the anticipated easing in global interest rates, even though the pace might be held back by the uncertainty with respect to the magnitude and timing of interest rate cuts, notably in the US.

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Chua Han Teng, CFA

Economist - Asean
[email protected]
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