Singapore: Lifting 2024 growth forecast on external upturn
Singapore’s economic growth prospects are looking brighter in 2024 after experiencing a soft patch in 2023.
Group Research - Econs, Chua Han Teng12 Jul 2024
  • 2Q24 advance GDP growth ticked up to 0.4% QoQ sa and came in at 2.9% YoY.
  • We expect a further pick-up in sequential QoQ sa growth expansion in 2H24.
  • Manufacturing returned to growth in 2Q24 and is set to recover gradually.
  • The outlook for external-oriented services will likely be supportive of 2H24’s expansion.
  • Implications for our forecast: We raise our growth forecast to 2.7% for 2024.
Article image
Photo credit: Adobe Stock Photo
Read More

Below is a summary; for full report and detailed charts, please download the PDF

Singapore’s economic growth prospects are looking brighter in 2024 after experiencing a soft patch in 2023. Advance estimates (AE) showed a slight uptick in real GDP growth to 0.4% quarter-on-quarter seasonally adjusted (QoQ sa) in 2Q24, from an upwardly revised rate of 0.3% QoQ sa in 1Q24. Supported by favourable base effects, the economy expanded by 2.9% year-on-year (YoY) in 2Q24. The upward revision of growth in 1Q24 to a 3.0% YoY increment also stood out. This suggests economic growth registered at 3.0% YoY in 1H24, turning around from the muted performance of just 1.1% for 2023.

We are raising our 2024 growth forecast to 2.7% from 2.2%. We factor in the growth performance in 1H24 and our expectations for a further pick-up in sequential QoQ sa expansion in 2H24. External-led sectors will likely be supportive, with manufacturing and modern services rebounding and trade-related services remaining in expansion. This is even as we remain vigilant on downside global risks such as supply chain disruptions from lingering geopolitical tensions and volatility arising from the timing and extent of upcoming US interest rate cuts. 

Electronics to drive manufacturing recovery

Singapore’s manufacturing sector rebounded in 2Q24, and we expect a gradual recovery in 2H24. AE showed a reversion in factory output to the expansion of 0.6% QoQ sa and 0.5% YoY in 2Q24, bouncing from the transitory contraction of 5.3% QoQ sa and 1.7% YoY in 1Q24. Notably, electronics, which accounts for almost half of overall manufacturing production, is catching up after correcting in 1Q24.

The positive sentiment among Singapore’s electronics firms supports our expectations for improved prospects. The electronics manufacturing purchasing managers index (PMI) not only expanded for the eighth straight month but quickened for the fourth consecutive month to 51.2 as of June 2024. We continue to see signs of improved external demand for electronics products from gains in new orders, new export orders, and backlog orders amid the ongoing global tech cycle upturn. The global tech cycle will likely be underpinned by the replacement of smartphones and PCs, as well as the broadening use of artificial intelligence (AI) applications to consumer devices that are for everyday use.

Supportive external-oriented services sector

Singapore’s overall services sector expansion cooled in 2Q24 but remains in good shape, in our view. Overall services growth cooled to 0% QoQ sa and 3.3% YoY in 2Q24 from 2.2% QoQ sa and 4.3% YoY in 1Q24. External-oriented services clusters outperformed in 2Q24.

The trade-related ‘wholesale & retail trade and transportation & storage cluster extended its expansion with 0.7% QoQ sa and 2.5% YoY in 2Q24, albeit slower than 2.7% QoQ sa and 3.9% YoY in 1Q24. We expect trade-related services to be supported by the gradual recovery in global trade and Singapore’s manufacturing activity.

Activity in the modern services cluster (comprising of information & communications, finance & insurance, and professional services) rebounded to 1.4% QoQ sa growth in 2Q24 from a contraction of 2.8% QoQ sa in 1Q24. Amid favourable base effects, the cluster grew robustly by 5.6% YoY in 2Q24, steady vs. 5.7% YoY in 1Q24. Focusing on financial services, we expect activity to be sustained sequentially.

However, growth in the ‘Accommodation & food services, real estate, administrative & support services, and other services’ cluster shrank by 0.5% QoQ sa in 2Q24 from the growth of 2.3% QoQ sa in 1Q24. This translated to a slower YoY increase of 1.9% in 2Q24 vs 3.0% YoY in 1Q24. We were unsurprised by the dampened activity in 2Q24. We reckon that this was likely due to the fading strength in the tourism-linked clusters, with food services contracting and accommodation expanding at a slower rate. Looking ahead, we expect tourism-related activity to be supported by a return of Chinese tourists during their summer break in July and August 2024, as well as an overall uptick in international visitors for the Singapore Grand Prix in September 2024.

Major uncertainty looming

The outlook appears sanguine cyclically, although with near-term downside risks such as supply chain disruptions from lingering geopolitical tensions and volatility from the timing and extent of upcoming US interest rate cuts. However, beyond that, it looks foggy. The US presidential elections in November 2024 is a major uncertainty and event that can shape the global economic landscape for years to come. The polls suggest increased odds of Trump securing a victory. The scenario of a second Trump presidency, in which the administration might impose higher tariffs of as high as up to 60% on Chinese imports and 10% on imports from other countries, would be significantly negative for global trade and Singapore’s highly trade-dependent economy.

To read the full report, click here to Download the PDF.

Chua Han Teng, CFA

Economist - Asean
[email protected]


To read the full report, click here to Download the PDF

Subscribe here to receive our economics & macro strategy materials.
To unsubscribe, please click here.

Topic

Explore more

E & S Flash
GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates)

GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates)

The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation.  Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies.  The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation.  The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.

[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.

DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.

DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.

DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability.  11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.

Virtual currencies are highly speculative digital "virtual commodities", and are not currencies. It is not a financial product approved by the Taiwan Financial Supervisory Commission, and the safeguards of the existing investor protection regime does not apply.  The prices of virtual currencies may fluctuate greatly, and the investment risk is high. Before engaging in such transactions, the investor should carefully assess the risks, and seek its own independent advice.