Singapore Economic Outlook 2024

Since the Economic Survey of Singapore in November 2023, Singapore’s external demand outlook for 2024 has remained largely unchanged. Growth in the advanced economies is expected to moderate in the first half of the year, mainly due to continued tight financial conditions, before recovering gradually in line with an expected easing of monetary policy as inflationary pressures recede. Meanwhile, regional economies are expected to see a pickup in growth in the year ahead, supported in part by the turnaround in the demand for global electronics.

In the US, GDP growth is expected to continue to ease in the coming quarters amidst continued tight financial conditions before picking up later in the year alongside a loosening of monetary policy, which will support a recovery in investment growth. Similarly, GDP growth in the Eurozone is forecast to remain subdued in the first half of the year. However, growth should improve in the latter part of the year as a further easing of inflationary pressures and anticipated policy rate cuts are likely to support a firmer recovery in private consumption expenditure.

In Asia, China’s GDP growth is projected to remain lacklustre in the first half of the year due to sluggish domestic consumption and export growth alongside weak property market conditions. Growth is likely to recover gradually in the second half in line with improvements in consumer sentiments and global demand. Meanwhile, GDP growth in the Southeast Asian economies of Malaysia and Thailand is likely to be supported by the continued recovery in tourist arrivals, as well as an anticipated pickup in global electronics demand.

At the same time, downside risks in the global economy remain significant. First, an escalation or widening of the Israel-Hamas conflict or war in Ukraine could disrupt global supply chains and commodity markets. This would weigh on global trade and growth. Second, the lagged effects of monetary tightening could trigger latent vulnerabilities in banking and financial systems, which stresses regional economies with external financing needs. Third, should idiosyncratic cost shocks such as adverse weather events disrupt the global disinflation process, financial conditions could stay tight for longer, thereby weakening the economic recovery momentum.

Against this backdrop, Singapore’s manufacturing and trade-related sectors are expected to see a gradual pickup in growth in tandem with the turnaround in the demand for global electronics. In particular, the electronics and precision engineering clusters within the manufacturing sector are projected to rebound, especially given that the recovery in semiconductor sales globally and domestically has been stronger than expected. At the same time, the machinery, equipment & supplies segment of the wholesale trade sector will benefit from higher external demand for electronic components and, telecommunications & computers.

Meanwhile, the continued recovery in air travel and tourism demand will support growth in Singapore’s tourism- and aviation-related sectors, including aerospace, air transport and accommodation, as well as consumer-facing sectors such as retail trade and food & beverage services. Nonetheless, the pace of growth for most of these sectors is expected to moderate from that in 2023.

Taking into account the global and domestic economic environment, the GDP growth forecast for Singapore for 2024 is maintained at 1.0 to 3.0 per cent.

For the whole of 2023, the Singapore economy expanded by 1.1 per cent, moderating from the 3.8 per cent expansion in 2022.

The manufacturing sector shrank by 4.3 per cent, a reversal from the 2.7 per cent growth in 2022. Within the sector, all clusters recorded output declines, except for the transport engineering cluster.

The construction sector grew by 5.2 per cent, improving from the 4.6 per cent growth in 2022, supported by expansions in both public and private sector construction works.

The services producing industries expanded by 2.3 per cent, slowing from the 5.1 per cent growth in 2022. Growth was mainly driven by the other services, information & communications and transportation & storage sectors.

Modest growth expected in 2024 in line with global economic and trade outlook, and expected recovery from the electronics downcycle.

• Amid lower oil prices y-o-y and sluggish global electronics demand, oil trade and electronics trade drove 29% and 43% of total merchandise trade’s decline respectively in 2023. This was higher than their respective shares of total trade in 2022 (oil trade: 21%, electronics trade: 34%). Similarly, electronics exports drove 34% of NODX’s decline in 2023, disproportionately higher than its 23% share of NODX in 2022. Accounting for an expected recovery in the electronics cycle, both total trade and NODX are projected to pick up in 2024.

• For 2024, global electronics demand is projected to gradually recover as inventory levels normalise. Since the last update, a net weighted balance of 16% of firms in the electronics cluster projected improved business prospects for the period January to June 2024 compared to the fourth quarter of 2023. Exports price index of electronics-related products had declined y-o-y at a slower pace in 4Q 2023, compared to 3Q 2023. Meanwhile, oil prices in 2024 are projected to be similar to that in 2023.

• In terms of global outlook, the International Monetary Fund (IMF) has projected that global economic activity will grow by 3.1% in 2024. This was up from the previous 2.9% estimate in October 2023, reflecting the upgrade in growth outlook for most of Singapore’s key trade partners, including China, the US and ASEAN-5. Overall, the IMF expects global growth to be resilient in 2024, after 2023’s growth (similarly at 3.1%).

• On the trade front, the IMF projected higher world trade volume growth in 2024 (+3.3%) than in 2023 (+0.4%). Similarly, the World Trade Organisation (WTO) expected global merchandise trade to grow faster in 2024 (+3.3%) than in 2023 (+0.8%).

Taking the above into consideration, the 2024 growth projection for total merchandise trade is maintained at “+4.0% to +6.0%”, while that for NODX is upgraded to “+4.0% to +6.0%”.

TOTAL MERCHANDISE TRADE

Total merchandise trade declined by 11.7% in 2023; both oil and non-oil trade decreased.

• On a year-on-year (y-o-y) basis, Singapore's total merchandise trade declined by 11.7% in 2023, after the expansion in 2022 (+17.7%, 2021: +19.7%). 

• Total merchandise trade reached S$1.2 trillion in 2023 (2022: S$1.4 trillion; 2021: S$1.2 trillion). 

• Both exports and imports declined by 10.1% and 13.4% respectively in 2023.

• The decrease in total merchandise trade was driven by both oil and non-oil trade. 

• Oil trade contracted by 16.3% in 2023 amid lower oil prices than a year ago, after the 47.5% expansion in 2022. 

• Non-oil trade declined by 10.5% in 2023, after the 11.9% expansion in 2022.

TOTAL SERVICES TRADE

Total services trade declined in 2023

• Singapore’s total services trade declined by 3.8% in 2023, after the 22.4% expansion in 2022. Total services trade reached S$837 billion for the year, down from S$871 billion in 2022. Services exports and imports declined by 5.1% and 2.4% in 2023 respectively. 

• On a y-o-y basis, Singapore's total services trade decreased by 2.8% in 4Q 2023, following the decline of 6.9% in the previous quarter. Services exports and imports decreased by 3.9% and 1.5% in 4Q 2023 respectively.

• The Singapore economy grew by 2.2 per cent on a year-on-year basis in the fourth quarter of 2023, accelerating from the 1.0 per cent expansion in the previous quarter. On a quarter-on-quarter seasonally-adjusted basis, the economy expanded by 1.2 per cent, slightly faster than the 1.0 per cent growth in the third quarter.

• The manufacturing sector grew by 1.4 per cent year-on-year, a turnaround from the 4.9 per cent contraction in the preceding quarter. Growth was driven by output expansions in the electronics, transport engineering and chemicals clusters. On a quarter-on-quarter seasonally-adjusted basis, the sector expanded by 4.5 per cent, faster than the 0.8 per cent expansion in the previous quarter.

• Growth in the construction sector picked up to 5.2 per cent year-on-year, from 3.7 per cent in the third quarter, as both public and private sector construction output increased. On a quarter-on-quarter seasonally-adjusted basis, the sector expanded by 2.0 per cent, extending the 1.9 per cent growth in the preceding quarter.

• The wholesale trade sector grew by 0.2 per cent year-on-year, moderating from the 1.1 per cent growth in the previous quarter. Growth was largely supported by the machinery, equipment & supplies segment, which expanded due to an increase in the wholesale sales of electronic components in volume terms. On a quarter-on-quarter seasonally-adjusted basis, the sector shrank by 0.6 per cent, reversing the 0.5 per cent growth in the third quarter.

• The retail trade sector contracted by 0.3 per cent year-on-year, after expanding by 2.3 per cent in the preceding quarter. The weak performance of the sector was due to a fall in non-motor vehicle sales volume, even as motor vehicle sales volume picked up on account of an increase in COE quotas. On a quarter-on-quarter seasonally-adjusted basis, the sector shrank by 1.9 per cent, a pullback from the 0.3 per cent growth in the third quarter.

• The transportation & storage sector expanded by 2.8 per cent year-on-year, accelerating from the 0.9 per cent growth in the previous quarter. Within the sector, the air transport segment recorded robust growth as the total number of air passengers handled at Changi Airport continued to recover. Meanwhile, the water transport segment also expanded, supported by an increase in container throughput and total sea cargo handled at Singapore’s ports. On a quarter-on-quarter seasonally-adjusted basis, the sector grew by 1.1 per cent, a turnaround from the 1.1 per cent contraction in the third quarter.

• The accommodation sector posted an expansion of 1.5 per cent year-on-year, a slowdown from the 12.6 per cent growth in the preceding quarter. Growth of the sector continued to be boosted by a strong recovery in international visitor arrivals. On a quarter-on-quarter seasonally-adjusted basis, the sector contracted by 3.1 per cent, a reversal from the 2.3 per cent growth in the previous quarter.

• The food & beverage services sector shrank by 1.5 per cent year-on-year, reversing from the 2.9 per cent growth in the third quarter. The sector’s weak performance was due to lower sales volumes at restaurants, fast food outlets and cafes, food courts & other eating places, even as the sales volume at food caterers continued to increase. On a quarter-on-quarter seasonally-adjusted basis, the sector contracted by 1.5 per cent, extending the 0.8 per cent contraction in the preceding quarter.

• Growth in the information & communications sector came in at 4.7 per cent year-on-year, easing from the 6.0 per cent growth in the previous quarter. Within the sector, the IT & information services segment recorded strong growth on account of robust demand for data hosting services, internet search engine activities and online marketplaces for travel services. On a quarter-on-quarter seasonally adjusted basis, the sector expanded by a slower 1.1 per cent compared to the 4.8 per cent growth in the third quarter.

• The finance & insurance sector grew by 5.4 per cent year-on-year, faster than the 2.5 per cent growth in the preceding quarter. Within the sector, the banks segment saw a surge in net fees & commissions amidst higher wealth management income. Meanwhile, the insurance and activities auxiliary to financial services (which include payment processing activities) segments also expanded. On a quarter-on-quarter seasonally-adjusted basis, the sector grew by 4.1 per cent, improving from the 1.2 per cent growth in the previous quarter.

• The real estate sector expanded marginally by 0.1 per cent year-on-year, slowing from the 3.6 per cent growth in the third quarter. Growth was supported by the private residential property segment, as well as the commercial and industrial property segments. On a quarter-on-quarter seasonally-adjusted basis, the sector shrank by 0.9 per cent, following the 1.6 per cent contraction in the previous quarter.

• The professional services sector contracted by 0.7 per cent year-on-year, a reversal from the 1.4 per cent growth in the third quarter. The contraction of the sector was due to a weaker level of activity in most segments, with the exception of the accounting and head offices & business representative offices segments. On a quarter-on-quarter seasonally-adjusted basis, the sector grew by 1.3 per cent, easing from the 2.2 per cent expansion in the preceding quarter.

• The administrative & support services sector shrank by 1.7 per cent year-on-year, a pullback from the 1.4 per cent expansion in the previous quarter. The poor performance of the sector came on the back of contractions in both the other administrative & support services and rental & leasing segments. On a quarter-on-quarter seasonally-adjusted basis, the sector contracted by 0.7 per cent, deteriorating from the 0.3 per cent contraction in the third quarter.

• The “other services industries” grew by 3.9 per cent year-on-year, unchanged from the previous quarter. Growth during the quarter was broad-based, led by the arts, entertainment & recreation and “others” segments. On a quarter-on-quarter seasonally-adjusted basis, the sector expanded by 0.4 per cent, slower than the 1.3 per cent growth in the previous quarter.

For the whole of 2022, the Singapore economy expanded by 3.6 per cent, moderating from the 8.9 per cent growth in 2021.

• The manufacturing sector grew by 2.5 per cent, slower than the 13.3 per cent growth in 2021. Within the sector, all clusters expanded, except for the chemicals and biomedical manufacturing clusters.

• The construction sector posted growth of 6.7 per cent, extending the 20.5 per cent expansion in 2021, supported by both public and private sector construction works.

• The services producing industries expanded by 4.8 per cent, easing from the 7.6 per cent expansion in 2021. Growth was mainly driven by the wholesale trade, other services and information & communications sectors.

• For the whole of 2021, the Singapore economy expanded by 7.6 per cent, rebounding from the 4.1 per cent contraction in 2020.

• The manufacturing sector grew by 13.2 per cent, accelerating from the 7.5 per cent growth in 2020. Within the sector, output across all clusters rose, with the precision engineering, electronics and transport engineering clusters registering the largest output increases.

• The construction sector expanded by 20.1 per cent, a turnaround from the 38.4 per cent contraction in 2020, supported by both public and private sector construction works.

• The services producing industries grew by 5.6 per cent, a reversal from the 5.1 per cent contraction in 2020. All services sectors posted expansions, with the exception of the administrative & support services sector.

• For the whole of 2020, the Singapore economy contracted by 5.4 per cent, a reversal from the 1.3 per cent growth recorded in 2019.

• The manufacturing sector expanded by 7.3 per cent, a turnaround from the 1.5 per cent contraction in 2019. The sector’s growth was supported by robust expansions in the biomedical manufacturing, electronics and precision engineering clusters.

• The construction sector shrank by 35.9 per cent, a sharp retraction from the 1.6 per cent growth posted in 2019, weighed down by weakness in both public sector and private sector construction works.

• The services producing industries contracted by 6.9 per cent, reversing the 2.0 per cent growth recorded in 2019. Most services sectors saw a full-year contraction due to the widespread economic impact of the COVID-19 pandemic. Key exceptions were the finance & insurance and information & communications sectors, which expanded by 5.0 per cent and 2.1 per cent respectively.

The information listed above is to be used as a reference resource for your personal consumption only. It is not intended to be and does not constitute financial advice, investment advice or any other advice. While every endeavour has been made to ensure that the information provided herein is correct, ALLIANCE FACILITIES MANAGEMENT PTE LTD disclaims liability for any damage or loss that may be caused as a result of any error or omission.

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