Earlier this week on 22 November 2023, Singapore’s Ministry of Trade and Industry (MTI) released its economic forecast for the rest of 2023, and its projection for 2024.
MTI Expects Full-Year GDP Growth Of 1.0% For 2023
After a better-than-expected performance in the US economy, the projection for growth in the US and Eurozone for the rest of the year is expected to moderate due to the cumulative effects of monetary policy tightening. China’s growth is also anticipated to slow further due to ongoing weaknesses in its property sector, domestic consumption, and subdued external demand. Global electronics demand remains sluggish, affecting Singapore’s manufacturing and trade-related sectors.
Conversely, the ongoing recovery in air travel and inbound tourism is anticipated to support the growth of aviation-and tourism-related sectors in Singapore. Resilient labour market conditions are expected to bolster consumer-facing sectors such as retail trade and food & beverage services. Considering Singapore’s economic performance in the first three quarters of the year, the 2023 GDP growth forecast is narrowed to around 1.0 per cent.
Read Also: Singapore GDP Forecast For 2023 Was Lowered. 6 Sectors That Contracted In The 2nd Quarter
A Better Year Ahead In 2024?
Looking ahead to 2024, MTI expects global GDP growth in the US to moderate in the first half of 2024 before gradually picking up in the second half in line with the expectations of an easing of the monetary policy. Similarly, GDP growth in the Eurozone is forecast to remain subdued in the first half of 2024 due to restrictive financial conditions and sluggish external demand, before improving in the second half, supported by a pickup in domestic consumption as inflation recedes.
In Asia, China’s growth in 2024 may remain sluggish though MTI expects Southeast Asian economies like Malaysia and Thailand to experience growth supported by improved external demand for electronics and resilient domestic demand.
Goldman Sachs Research also expressed similar optimism on major economies avoiding a recession. They anticipate positive real disposable income growth in the US, supporting consumption and GDP growth of at least 2 per cent, while the Euro area and the UK are expected to experience significant acceleration in real income growth.
Secondly, despite rate hikes and fiscal policy impacting G10 economies, Goldman Sachs expects a smaller drag from tighter financial conditions in 2024 compared to 2023. Also, industrial activity, previously hindered by various factors, is forecasted to recover as headwinds fade.
Lastly, Goldman Sachs believes the “most novel reason” to be optimistic about GDP growth is that central banks don’t need a recession to bring inflation down, and will therefore try hard to avoid one.
Against this backdrop, MTI believes that the growth prospects of Singapore’s manufacturing and trade-related sectors are expected to improve, particularly in electronics and precision engineering clusters. The finance and insurance sector may also see a modest recovery if global interest rates moderate in 2024.
Additionally, the continuing recovery in air travel and tourist arrivals will likely support the growth of aviation-and tourism-related sectors. Considering these factors and barring the materialization of downside risks, the Singapore economy is expected to grow by 1.0 to 3.0 per cent in 2024.
Read Also: How Singapore’s Economy Performs In Presidential Election And General Election Years
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