Singapore narrows 2024 growth forecast to 2-3%, upper end of range; economy expands 2.9% in Q2
(Photo credit: ST File)
Source: The Straits Times
Singapore’s economy in 2024 is now forecast to expand at the upper end of its earlier estimated range, according to the Ministry of Trade and Industry (MTI) on Aug 13.
MTI narrowed its 2024 growth forecast to 2 per cent to 3 per cent, from its earlier estimated range of 1 per cent to 3 per cent.
This was after taking into account the performance of the Singapore economy in the first half of 2024, as well as the latest global and domestic economic situations, said the ministry.
For the first half of 2024, Singapore’s gross domestic product growth averaged 3 per cent year on year.
MTI’s narrowed 2024 outlook is in line with that of the Monetary Authority of Singapore, which on July 26 had said GDP growth is likely to come in closer to its potential rate of 2 per cent to 3 per cent for the full year.
For the second quarter, the economy grew 2.9 per cent, unchanged from MTI’s advance estimate released a month ago. This follows first-quarter growth of 3 per cent – the fastest pace since the 4.2 per cent expansion in the third quarter of 2022.
On a quarter-on-quarter basis and seasonally adjusted, the economy expanded 0.4 per cent, also in line with the advance estimate and unchanged from the expansion in the first quarter.
Growth in the second quarter was primarily driven by the wholesale trade, finance and insurance, and information and communications sectors, MTI said.
However, the manufacturing sector shrank, largely due to a contraction in the biomedical manufacturing cluster, which was caused by a sharp fall in pharmaceuticals output.
Meanwhile, the electronics cluster returned to growth, supported by strong demand for smartphone, personal computers and artificial intelligence-related chips, even as demand for automotive and industrial chips remained weak.
But consumer-facing sectors such as the retail trade and food and beverage services sectors shrank, partly due to an increase in outbound travel by locals.
MTI said that on balance, Singapore’s external demand outlook is expected to be resilient for the rest of 2024.
However, downside risks in the global economy remain. First, geopolitical and trade conflicts intensifying could dampen business sentiments and add to production costs, which could weigh on global trade and growth, MTI said.
Disruptions to the global disinflation process could also lead to tighter financial conditions for longer, and trigger market volatility or latent vulnerabilities in banking and financial systems.
Against this backdrop, Singapore’s manufacturing sector is expected to see a gradual recovery in the second half of 2024.
In particular, the electronics cluster is projected to recover more strongly, supported by robust demand for smartphone, PC and AI-related chips. This will in turn provide a boost to the precision engineering cluster, MTI said.
In addition, the chemicals cluster is expected to continue to expand, supported in part by higher production in the petrochemicals and specialty chemicals segments.
By contrast, the biomedical manufacturing cluster is likely to contract, as pharmaceuticals output is projected to stay weak for the rest of 2024.
At the same time, the projected recovery of the manufacturing sector, particularly that of the electronics cluster, is expected to benefit trade-related services sectors such as the machinery, equipment and supplies segment of the wholesale trade sector.
The continued recovery in air travel and tourism demand will also support growth in the tourism- and aviation-related sectors such as accommodation and air transport.
Growth in the finance and insurance sector should also remain robust, as global interest rate cuts continue to be implemented amid sustained disinflation.