SINGAPORE has narrowed its official full-year growth forecast for 2024 to a range of 2 to 3 per cent, from 1 to 3 per cent previously, the Ministry of Trade and Industry (MTI) said on Tuesday (Aug 13).
This comes as gross domestic product growth for the second quarter came in at 2.9 per cent, unchanged from July’s advance estimate and comparable to the previous quarter’s 3 per cent growth.
This narrowing comes after the Monetary Authority of Singapore said in its Jul 26 policy decision that Singapore’s full-year growth was likely to be closer to its potential rate of 2 to 3 per cent, with momentum improving in the second half.
Speaking to media at a Tuesday morning briefing, MTI chief economist Yong Yik Wei said barring downside risks in the global economy, the ministry expects growth in the Singapore economy to stay at this trend rate of around 2 to 3 per cent over the medium term, “up to 2033 or thereabouts”.
This was also the rate for the next decade noted by Prime Minister Lawrence Wong – then deputy prime minister – during Budget debates in February this year, she highlighted.
MTI permanent secretary for policy Gabriel Lim added that the agency is also trying to improve labour productivity performance, which will enable it to shift trend growth “a bit outwards”.
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On a quarter-on-quarter seasonally adjusted basis, the economy expanded by 0.4 per cent in Q2, the same as in Q1 and in line with early data.
At the sectoral level, Q2 growth was led by services-producing industries, which grew 3.7 per cent year on year, while overall growth for goods-producing industries was flat.
Specifically, Q2 growth was primarily driven by the wholesale trade, finance and insurance, and information and communications sectors, MTI said.
Wholesale trade was up 3.9 per cent, picking up from Q1’s 2.5 per cent increase. Finance and insurance grew 6.7 per cent, slower than the preceding quarter’s 7.1 per cent growth. For information and communications, growth was 6.4 per cent, marginally weaker than the first quarter’s 6.5 per cent.
In contrast, the manufacturing sector shrank by 1 per cent, though this was still an improvement from Q1’s 1.7 per cent contraction. The Q2 weakness was largely due to a sharp fall in pharmaceuticals output in the biomedical manufacturing cluster.
Precision engineering output also declined, but other clusters expanded. The electronics cluster returned to growth, supported by strong demand for smartphone, PC and AI-related chips, even as demand for automotive and industrial chips remained weak.
The construction sector grew 3.8 per cent in Q2, extending Q1’s 4.1 per cent growth, on the back of increases in output in both the public and private sectors.
Meanwhile, consumer-facing sectors such as retail trade as well as food and beverage services shrank, partly due to an increase in outbound travel by locals.
The retail trade sector contracted by 2.1 per cent year on year, reversing from the 2.5 per cent expansion in Q1. Similarly, food and beverage services fell 2.3 per cent, a pullback from the 0.9 per cent growth charted in Q1.
Outbound travel will likely remain robust on the back of the strong Singapore dollar for the rest of the year, putting a drag on consumer facing sectors, said Yong, But the recovery in inbound tourism should offer some support, she added.
Resilient external demand
MTI noted that growth in Singapore’s major trading partners has largely aligned with expectations since the last economic survey in May.
The key exceptions were the US and Malaysia – which performed better than expected on the back of strong domestic demand – as well as Japan, where growth was instead weighed down by weak private consumption.
On balance, Singapore’s external demand outlook is expected to be resilient for the rest of the year, said MTI.
“While GDP growth in the US and China is expected to ease gradually, GDP growth in the eurozone, Japan and key South-east Asian economies should improve,” Lim said at the press briefing. But he noted that downside risks remain.
MTI said: “First, an intensification of geopolitical and trade conflicts could dampen business sentiments and add to production costs, which could weigh on global trade and growth.
“Second, disruptions to the global disinflation process could 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 anticipated to recover gradually in the second half, with electronics 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.
Chemicals is also expected to continue to expand, while biomedical manufacturing is expected to contract.
Overall, the projected recovery of the manufacturing cluster is expected to benefit trade-related services sectors such as the machinery, equipment and supplies segment of the wholesale trade sector.
Meanwhile, continued recovery in air travel and tourism demand will support growth in the tourism- and aviation-related sectors, and growth in the finance and insurance sector should also remain robust, as global policy rate cuts continue to be implemented amid sustained disinflation.
