- 4Q23 GDP growth ticked up from 3Q23 to 2.2% YoY, 1.2% QoQ sa, but softer than advance estimates.
- External-led sectors will support 2024’s growth recovery.
- Yet, the improvement is likely fragile, given lingering global uncertainties.
- Budget 2024 to prepare Singapore for a tough global backdrop.
- Implications for our forecast: We maintain our 2.2% growth forecast for the full year 2024.
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Singapore’s economic growth remains poised to recover in 2024 despite a softer 4Q23 expansion than the advance estimates (AE). February 15’s release showed 4Q23 real GDP growth of 2.2% YoY, 1.2% QoQ sa, lower than AE’s 2.8% YoY, 1.7% QoQ sa, due to downward revisions across key sectors. Yet, 4Q23’s headline sequential growth momentum was slightly quicker than 3Q23’s 1.0% QoQ sa expansion and performed considerably better than 1H23’s -0.1% QoQ sa average.
We maintain our 2.2% growth forecast for full-year 2024, from 2023’s 1.1%. We expect the external-led sectors to support Singapore’s growth recovery. Yet, the improvement will likely be fragile amid global economic uncertainties from high interest rates in advanced economies, bumpy conditions in China, and lingering geopolitical risks that could disrupt supply chains. The Ministry of Trade and Industry (MTI) maintained its 2024 growth forecast range at 1.0% to 3.0% but reiterated significant downside risks.
Manufacturing on a recovery path
Singapore’s manufacturing sector is turning around from the doldrums experienced for most of 2023, and we continue to expect a recovery in 2024. Factory momentum is improving despite 4Q23’s downward revision. 4Q23 manufacturing activity rose by 4.5% QoQ sa, translating to 1.4% YoY expansion. The performance was better than 1H23 declines, although weaker than AE’s 9.0% QoQ sa, 3.2% YoY print. Singapore’s manufacturing companies are cautiously optimistic on 1H24 prospects, according to the Economic Development Board’s (EDB) business expectations survey.
Services trends shifting
Growth trends within the diversified services sector are shifting, having cushioned the overall economy in 2023. 4Q23 services expansion softened to 2.0% YoY, from 3Q23’s 2.3% YoY increment, with sequential growth staying positive at 0.3% QoQ sa. We expect overall services growth to hold up in 2024, mainly supported by external-facing services clusters.
Budget 2024: growth supportive stance
Singapore faces an increasingly uncertain global environment, notwithstanding improved 2024 growth prospects. Budget 2024 will be announced on February 16, against this challenging backdrop. We believe the budget will focus on adapting to challenges and seizing opportunities to build a better Singapore in a highly uncertain world.
We expect a slightly expansionary fiscal stance in FY2024, with an overall fiscal deficit of SGD3.0bn (0.4% of GDP). More measures and allowances to tide through high costs, job disruption, and retirement are likely. The priority will also be lifting capabilities by upskilling, riding emerging trends, and remaining attractive (see ‘Singapore Budget 2024: Growth supportive stance’ for a detailed report).
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