SINGAPORE has maintained its official full-year growth forecast for 2024 at a range of 1 to 3 per cent, as the external demand outlook remains resilient and is expected to improve for the rest of the year, the Ministry of Trade and Industry (MTI) said on Thursday (May 23).
This comes as gross domestic product for the first quarter came in at 2.7 per cent, unchanged from April’s advance estimate.
This was an improvement from the previous quarter’s 2.2 per cent growth, and slightly higher than the 2.5 per cent year-on-year (yoy) growth that private-sector economists were expecting, according to a Bloomberg poll.
On a seasonally adjusted quarterly basis, the economy expanded marginally by 0.1 per cent, unchanged from the advance estimate but slower than the previous quarter’s 1.2 per cent growth. It also beat economists’ median expectation of a 0.3 per cent contraction.
RHB acting group chief economist Barnabas Gan noted that Q1’s growth was underpinned by the services industry, which expanded 3.9 per cent yoy – an improvement from the advance estimate of 3.2 per cent, as well as the previous quarter’s 2 per cent growth.
“The upside revision in services growth has outweighed the downward revisions in Singapore’s manufacturing and construction,” he added.
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Manufacturing contracted 1.8 per cent, reversing from the previous quarter’s 1.4 per cent growth. This was largely due to an output decline in the electronics cluster, caused by the demand for automotive and industrial chips, said MTI Permanent Secretary for Policy Gabriel Lim.
Meanwhile, construction grew 4.1 per cent yoy, extending the previous quarter’s 5.2 per cent growth – but this was a notch lower than the 4.3 per cent advance figure in April.
Despite the surprise Q1 print, Gan sees a risk for Q2 growth to slow to around 1.5 per cent yoy. “On the back of Singapore’s annual declines seen in high-frequency data… we think further annual declines are still possible for Singapore’s externally oriented sectors for this quarter.”
In Q1, the goods-producing industries as a whole contracted 0.7 per cent yoy.
Meanwhile, among services, accommodation was the best-performing segment, growing by 14.4 per cent yoy in an extension of the previous quarter’s 1.5 per cent growth.
Since the last update in February, the external economic environment has remained resilient, with better-than-expected economic growth in both the US and China in Q1 due to stronger-than-expected demand, said MTI.
Lim said: “Looking ahead, GDP growth in the major economies is expected to taper gradually in the immediate quarters due to tight financial conditions, before picking up alongside anticipated policy rate cuts later in the year.”
But downside risks to the global economy remain, including escalations in geopolitical tensions in the Middle East, disruptions to the global disinflation process, and vulnerabilities in emerging markets arising from a desynchronisation of their monetary policy cycles from that of advanced economies, leading to greater volatility in capital flows and currency fluctuations.
MTI’s assessment is that Singapore’s manufacturing and trade-related sectors are expected to see a “gradual pickup” in growth over the rest of the year, said Lim.
Within manufacturing, the electronics cluster is expected to recover gradually in the coming quarters. This will in turn have a positive spillover effect on precision engineering, as well as the machinery, equipment and supplies segments of the wholesale trade sector.
The outlook for the aviation and tourism-related sectors as well as consumer-facing sectors, such as retail trade and food-and-beverage services, remain positive, due to the stronger-than-anticipated recovery in air travel and tourism demand.
Meanwhile, the finance and insurance sector will be supported by higher tourist spending as well as the projected peaking of global interest rates, which will support the banking and fund management segments through higher commissions and fees.
