Analysts are upbeat on Singapore’s prospects for 2024 after the republic’s 4Q2023 GDP grew by 2.8% y-o-y, beating Bloomberg’s consensus of 1.8% y-o-y.
The Ministry of Trade and Industry (MTI) released its advanced estimates on Jan 2, which also revealed that Singapore’s full-year GDP growth came in at 1.2% y-o-y.
DBS Group Research economist Chua Han Teng sees that the Singapore economy is poised to recover in 2024 after enduring a challenging 2023. On a quarterly basis, there are signs of recovery in the 4Q2023 numbers, thanks to the manufacturing and construction sectors.
“The recovery from 2023 will be mainly external-led, but is likely fragile, given lingering global uncertainties,” he says, while keeping his growth forecast for 2024 at 2.2% y-o-y.
Maybank Securities economists Chua Hak Bin and Brian Lee said that the strong 4Q recovery heralds a brighter outlook for 2024. Singapore’s GDP for the 4Q2023 and full year came in above their estimates.
“We expect stronger and more balanced economic growth of +2.2% in 2024, as manufacturing recovers while revenge spending in services moderates,” they write. “Trade-related and outward-oriented services sectors, including wholesale trade and financial services, will return to positive growth in 2024 with the global demand pickup and easing domestic interest rates.”
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In their report dated Jan 2, Chua and Lee expect the Monetary Authority of Singapore (MAS) to maintain its current appreciation stance in its upcoming meeting to be held no later than Jan 29. This is given the recovery in the economy and still-elevated core inflation.
Based on their calculations, the Singapore dollar nominal effective exchange rate (S$NEER) is trading around +2% above the midpoint.
RHB Bank Singapore’s acting group chief economist Barnabas Gan is keeping his GDP estimate for 2024 unchanged at 3.0%, which is at the top end of the MTI’s 1.0% - 3.0% range.
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“Our forecast for Singapore to see a growth momentum acceleration in 2H2023 has materialised nicely because of our proprietary leading index. For 2024, our leading indicators continue to underpin a relatively sanguine outlook for Singapore,” he says.
According to Gan, recent non-oil domestic exports (NODX) data also suggests a positive export environment as he looks out for China’s economic recovery this year.
“We keep our above-consensus growth forecasts for the US and China at 2.2% and 5.0% in 2024, with much of the recovery likely predicated towards a strong global external backdrop,” he says.
Looking ahead, Gan is remaining positive on the electronics, precision-engineering, transport-engineering, and general manufacturing industries. China’s potential economic recovery in 2024 may also fuel tourism demand in Asean-6 and Singapore.
Analysts from Oversea-Chinese Banking Corporation (OCBC) and UOB are less upbeat. OCBC’s chief economist and head of global markets research & strategy Selena Ling notes that despite the q-o-q growth in 4Q2023, growth momentum during the quarter has “clearly slowed” for a few key industries such as the services sector, the wholesale & retail trade and transportation & storage industry and the accommodation & food services, real estate, administrative & support services and other services industry.
While GDP growth expanded by 1.2% for 2023, this is a “marked moderation” from 2022’s 3.6% y-o-y growth with the sectoral outlook remaining “fairly uneven” with manufacturing underperforming at -3.6% y-o-y but mitigated by growth in construction and services at 7.7% and 2.3% y-o-y respectively.
In 2024, Ling is forecasting a full-year GDP growth of 2%, noting that the external environment may be “less favourable” to Singapore’s security and prosperity, in reference to Prime Minister Lee Hsien Loong’s New Year message for the year.
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Like Maybank’s Chua and Lee, Ling expects the MAS to keep its monetary policy stance unchanged in January.
UOB’s senior economist Alvin Liew and associate economist Jester Koh note that 2023’s GDP marked the weakest annual GDP growth seen since the Global Financial Crisis (GFC) excluding the Covid-19 downturn in 2020. That said, Singapore’s full-year GDP growth of 1.2% came in above their estimate of 0.9%.
The extent of improvement in Singapore’s 4Q2023 GDP, though led by a robust 9.0% q-o-q expansion in manufacturing, was moderated by the services sector, which stood flat q-o-q.
In 2024, Liew and Koh see that the progress of recovery in externally oriented sectors such as manufacturing, wholesale trade, transportation & storage, finance & insurance could remain choppy in 1H2024 with a more meaningful recovery anticipated only in 2H2024.
Tailwinds from the post-pandemic boom in consumer-related sectors should dissipate in 2024 although further recovery in tourist arrivals from China could provide marginal support, they add.
Furthermore, Singapore’s competitiveness as a tourism destination could be weighed down by structurally higher price levels compared to the rest of the Asean economies in addition to the effects from the strong exchange rate.
Liew and Koh have kept their full-year GDP for 2024 at 2.9%.
Sumitomo Mitsui Banking Corporation’s (SMBC) economist Abe Ryota is expecting Singapore’s GDP to grow by 2.2% in 2024.
“As shown by the 4Q2023 GDP preliminary data, the economy has continued to grow steadily. In 2024, the economic growth will largely depend on whether export growth will expand and manufacturing production will recover steadily, and stable expansion of service consumption will continue,” he says.
“Although GST will be raised from 8% to 9% from Jan 1, the adverse effect is likely to be limited. As such, the economy is expected to continue growing steadily in 2024, and the output gap may become rather tight, resulting in the stickiness of inflation,” he adds.
