SINGAPORE – Singapore’s economy is projected to grow at almost the same pace next year as this year, according to a report from the Monetary Authority of Singapore (MAS) on Monday (28 October). This growth will be supported by the ongoing upturn in the global technology cycle as well as a gradual easing of financial conditions, as mentioned in the latest half-yearly macroeconomic review.
MAS expects Singapore’s economic growth this year to be at the upper end of the 2 to 3 per cent range, with similar projections for 2024. ‘GDP growth in both years will be supported by the modern trade and services cluster,’ the report said.
The outlook for global trade remains optimistic, while the cyclical recovery in technology is expected to extend to consumer devices, beyond artificial intelligence (AI)-related infrastructure. Increased adoption of AI is predicted to drive the information and communications sector, as companies accelerate their digital transformation.
The financial sector is also expected to continue to grow, fuelled by global monetary policy easing. In addition, asset managers recorded an increase in assets under management, as international investors became more interested in Asia.
Manufacturing Recovery in Third Quarter
The MAS report noted that Singapore’s economy showed a significant recovery in the third quarter of this year, with growth reaching 4.1 per cent according to preliminary estimates from the Ministry of Trade and Industry. The figure was above the pre-pandemic average, with around 60 per cent of industries recording equivalent or above-average growth.
The overall economic recovery was fuelled by a resurgent external sector, while the manufacturing sector provided an additional boost in the third quarter. All manufacturing clusters recorded increased production, with the electronics sector growing 15.4 per cent compared to the same period last year. The biomedical sector also saw an 8.8 per cent increase after 10 quarters of contraction.
The financial sector also recorded stronger trading activity amid global market volatility. Increased tourist arrivals, particularly from China, also contributed significantly to growth. The number of Chinese tourists increased by 56 per cent, accounting for two-thirds of the increase in total arrivals. Hotel occupancy rates rose, supported by longer duration of tourist visits.
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Challenges and Risks for 2024
While the economic outlook for 2024 is solid, there are downside risks that could arise from an escalation of geopolitical tensions or a sharper slowdown in China’s economic growth. Other factors that could influence are the US presidential election and tensions in the Middle East.
MAS also noted that the sustainability of the AI-led tech cycle recovery still depends on global demand conditions.
Inflation Expected to Slow
inflation, which excludes private accommodation and transport, is expected to end the year at around 2 per cent. However, inflation could pick up slightly in the last quarter of the year due to seasonal demand.
For next year, core and overall inflation is expected to average in the range of 1.5 to 2.5 per cent, with the effect of the goods and services tax hike starting to wane. In the event of a significant global economic slowdown, domestic prices could fall lower than expected.
