Singapore narrows 2024 GDP growth forecast to 2% to 3%

SINGAPORE: Singapore has narrowed its gross domestic product (GDP) growth forecast for 2024 to 2 per cent to 3 per cent, the Ministry of Trade and Industry (MTI) said on Tuesday (Aug 13), following a better than expected performance in the first half of the year.
The forecast previously stood at 1 per cent to 3 per cent, and Singapore’s GDP growth averaged 3 per cent for the first six months of the year when compared with the previous year.
MTI said the Singapore economy expanded by 2.9 per cent in the second quarter, in line with its advance estimates released last month, and slightly lower than the 3 per cent recorded in the first quarter. Economists in a Reuters poll forecast growth of 2.7 per cent for the second quarter.
Growth in the second quarter was driven primarily by the wholesale trade, finance and insurance, and information and communication sectors, MTI said.
The manufacturing sector shrank, largely due to a contraction in the biomedical manufacturing cluster, where there was a sharp fall in pharmaceuticals output. That offset the growth in the electronics cluster, which was supported by strong demand for smartphone, PC and artificial intelligence-related chips.
Consumer-facing sectors such as retail trade and food and beverage services shrank, in part because of increased outbound travel by locals.
MTI chief economist Yong Yik Wei told reporters that Singapore’s trend growth in the medium term, or until 2033, is around 2 per cent to 3 per cent, barring downside risks in the global economy. 
She noted that Prime Minister Lawrence Wong mentioned that expectation in his Budget speech earlier this year as well. 
Permanent secretary for policy Gabriel Lim said MTI is trying to improve Singapore’s overall labour productivity performance. “The better off we are in raising labour productivity, then the more we can shift our … trend growth a bit outwards.”
On a quarter-on-quarter seasonally adjusted basis, the economy grew by 0.4 per cent, in line with the 0.4 per cent expansion in the first quarter.
Ms Yun Liu, an ASEAN economist at HSBC, told CNA’s Asia First programme that the bank upgraded its GDP forecast for Singapore to 3 per cent last month.
She said there is quite a lot of good momentum in travel-related services, and that manufacturing and trade should recover as well.
“I am quite optimistic in the second half of this year, but obviously in terms of the downside risks we need to be very mindful (of) the trade recovery and how sustainable it can be, how broad-based it can be – I think that’s quite key,” she added.
The economic growth figures of Singapore’s major trading partners have mostly been in line with expectations since the Economic Survey of Singapore in May, MTI said.
The economies of the United States and Malaysia performed better than expected in the second quarter, boosted by strong domestic demand. On the other hand, growth in Japan was weighed down by weak private consumption as real wages continued to decline.
Looking ahead, US economic growth is expected to ease, with consumption growth slowing as the labour market weakens. Investment growth is likely to remain supported by AI-related investments, but consumption growth will probably slow as the labour market weakens.
The Eurozone’s GDP growth is likely to improve gradually, driven by a firmer recovery in consumer spending as price pressures ease and monetary policy becomes more accommodative. However, industrial activity and investments are likely to remain subdued for the rest of the year.
Japan’s GDP growth is expected to pick up, as broadening wage increases and easing inflationary pressures support private consumption.
China’s economy is also projected to expand, though at a slower pace in the second half of the year. 
Investment growth is likely to taper, but the property market should stabilise due to government support, and consumer sentiment should improve. Southeast Asian economies should grow with improvements in domestic demand and recovery in global electronics and tourism demand.
“On balance, Singapore’s external demand outlook is expected to be resilient for the rest of the year,” MTI said.
The manufacturing sector is likely to see a gradual recovery, with the electronics cluster recovering more strongly and providing a boost to the precision engineering cluster.
The chemicals cluster is expected to continue expanding, supported by higher production in the petrochemicals and specialty chemicals segments, though biomedical manufacturing is likely to stay weak.
Trade-related services are expected to benefit from the projected recovery in the manufacturing sector, and continued recovery in air travel and tourism will support growth in related sectors such as accommodation and air transport. 
Ms Yong said outbound travel is expected to remain strong, which could be a drag on consumer-facing sectors, but inbound tourists should provide some support.
Growth in the finance and insurance sector should remain robust as global policy rate cuts are implemented, MTI added.
However, the ministry flagged two downside risks that could have an impact on the global economy.
“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,” it said.
“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.”