Singapore economy keeps 2024 growth forecast at 1% – 3% as expansion slows to 1.1% in 2023

SINGAPORE – Singapore maintained its forecast that the economy will grow between 1 percent and 3 percent this year, warning that downside risks to the global economy remain significant.

In 2023, the economy is expected to grow by 1.1 percent, expanding by 3.8 percent in 2022, the Ministry of Trade and Industry (MTI) said on February 15. The figure was lower than the official estimate of 1.2 percent made in January.

Growth was 2.2 percent year-on-year in the final quarter of last year, down from an initial estimate of 2.8 percent. That missed the 2.5 percent growth average of analysts polled by Bloomberg.

MTI said Singapore's external demand outlook for 2024 remained largely unchanged since its last review in November.

„Growth in advanced economies is expected to moderate in the first half of the year due to continued tight financial conditions before gradually recovering in line with the expected easing of monetary policy as inflationary pressures ease,” said Dr Peh Swan Jin. MTI's Permanent Secretary for Development at a media briefing following the release of the Singapore Economic Survey 2023.

Regional economies are expected to pick up growth in the next year, partly supported by a turnaround in global electronics demand, he said.

However, the global economy still faces severe downside risks. These include the Israel-Hamas conflict, external financing needs that could weaken the pace of economic recovery, and the lagged effects of monetary tightening stressing regional economies with unique cost shocks.

MTI expects Singapore's manufacturing and trade-related sectors to see gradual growth in line with the turnaround in global electronics demand. Given the stronger-than-expected recovery in semiconductor sales, the electronics and precision engineering industries in particular are expected to rebound.

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Enterprise Singapore on February 15 raised its 2024 forecast for growth in core exports to 4 to 6 percent, compared with a 2 to 4 percent increase expected in November.

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

„However, the pace of growth in most of these sectors is expected to moderate from 2023,” Dr Beh said.

OCBC's Chief Economist Ms Selina Ling said 2023 marks the third consecutive year when growth has been negative at 3.9 per cent since the 2020 pandemic-induced recession.

He noted that the manufacturing sector grew by 1.4 percent year-on-year in the fourth quarter.

He added that the construction sector has gained momentum amid healthy public and private sector construction activity.

For the full year 2023, manufacturing is expected to contract another 4.3 percent and 2.7 percent in 2022, while construction accelerates.

Within services, it's been a bag of mixed fortunes – growth in the real estate sector has been more than half and growth in the food and beverage services sector has been modest.

The retail sales index turned negative in the fourth quarter of 2023 from 7.2 per cent growth in 2022 to just 0.6 per cent in 2023, Ms Ling said, as more Singaporeans went abroad, offsetting the influx of international visitors.

Maybank economist Chua Huck Bin noted that retaliatory spending on services is taking off more quickly than expected, as a strong Singapore dollar and higher prices encourage locals to spend overseas.

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Dr Chua expects GDP growth to rise to 2.2 per cent in 2024 on the back of a recovery in manufacturing and trade-related services.

DBS economist Chua Han Teng also expects growth of 2.2 percent this year.

DBS's Mr Chua expects businesses to adapt to challenges and focus on seizing opportunities – with Singapore's budget to be announced on February 16.

„Additional measures and allowances are possible for high costs, job disruptions and retirements. Upgrading skills, riding emerging trends and staying attractive will be a priority,” he said.

Last year, manufacturing unit business cost grew at 8.5 percent, compared to 9.9 percent in 2022.

MTI expects overall unit labor costs for the economy to continue to rise in 2024, albeit at a more modest pace than in 2023.

This is because the growth of wages per worker is likely to be moderated by easing labor market tightness. At the same time, utilities, fuel and transportation costs are expected to remain broadly stable in 2024, in line with the outlook for global oil prices.

Mr Edward Robinson, chief economist at the Monetary Authority of Singapore (MAS), said monetary policy remained appropriate despite „continued uncertainties on the growth and inflation fronts”, which the central bank is closely monitoring.

Core inflation has eased from its peak of 5.5 percent in January 2023, albeit at 3.3 percent in December.

Mr Robinson said the property market was stabilizing and expected the trend to continue.

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