Economists bump up Singapore’s 2024 growth forecast after Q3 surprise
At least two economists expect full-year growth to exceed official estimates of 2 to 3%
SINGAPORE’S economy exceeded expectations to grow 4.1 per cent year on year in the third quarter of 2024, indicated advance estimates by the Ministry of Trade and Industry (MTI), prompting some private-sector economists to raise their full-year growth forecasts.
This comes as the Monetary Authority of Singapore (MAS) said separately that it expects 2024 full-year growth to come in around the upper end of the 2 to 3 per cent forecast range, after it held steady its monetary policy settings for the sixth consecutive meeting.
Among the economists who bumped their 2024 growth forecasts up, at least two expect full-year growth to exceed MTI’s official estimate of 2 to 3 per cent.
Barclays and RHB raised their forecasts, but kept within official estimates. Barclays upgraded its forecast to 2.8 per cent, from 2.5 per cent, while RHB raised its forecast to 3 per cent, from 2.5 per cent.
Meanwhile, both UOB and DBS’ new estimates exceed the official forecast range. UOB now expects full-year growth of 3.3 per cent, from 2.9 per cent, while DBS expects growth of 3.5 per cent, from 2.7 per cent previously.
“Resilient external demand should continue to support the expansion of Singapore’s external-oriented sectors,” said DBS analysts Chua Han Teng and Philip Wee.
“Our 2025 growth forecast is in line with the Monetary Authority of Singapore’s expectation for the economy to expand at close to its potential rate next year, which we see as 2 to 3 per cent over the medium term.”
RHB acting group chief economist Barnabas Gan said the factors driving its forecast upgrade include the optimistic outlook for the manufacturing sector for the rest of the year and the improving global and domestic economic landscape, alongside the better-than-expected third-quarter growth figure.
Barclays analysts Brian Tan and Audrey Ong said their upgraded forecast assumes “a significant pullback in manufacturing activity in September and in Q4”. But should industrial production sustain, full-year gross domestic product growth could exceed 3 per cent, they added.
Manufacturing uplift
In Q3, GDP growth rose at its fastest pace since the third quarter of 2022, when the economy expanded by 4.2 per cent. It was also an improvement from the previous quarter’s 2.9 per cent growth.
On a seasonally adjusted quarterly basis, Singapore’s economy grew 2.1 per cent, faster than the previous quarter’s 0.4 per cent growth.
Both year-on-year and quarter-on-quarter growth figures beat private-sector economists’ expectations of 3.8 per cent and 2 per cent, respectively, indicated a poll by Bloomberg.
The growth acceleration was largely due to the sharp rebound in manufacturing growth, noted OCBC chief economist Selena Ling, which expanded by 7.5 per cent on the year, after two consecutive quarters of contraction.
Growth in the sector was supported by output expansions across manufacturing clusters, except for biomedical manufacturing, said MTI in its release.
Sequentially, manufacturing expanded 9.9 per cent, turning around from the previous quarter’s 1.2 per cent contraction.
Construction and services also sustained “credible growth” at 3.1 per cent and 3.3 per cent, respectively, noted Ling, though this was a moderation from the previous quarter’s respective 4.8 per cent and 3.6 per cent growth.
Sequentially, construction growth was flat, slowing from the previous quarter’s 3.4 per cent growth. Meanwhile, services growth nudged up 0.3 per cent, though easing slightly from the 0.4 per cent growth in the preceding quarter.
For the rest of the year, Singapore’s growth will be supported by a broadening electronics recovery, buoyant regional trade activities and easing interest rates, said Maybank economists Chua Hak Bin and Brian Lee.
The economists maintained their growth forecast at 3.5 per cent for the full year, and expect GDP growth to ease to 2.5 per cent in 2025.
With Singapore expected to benefit from the upswing in the electronics and trade cycles, as well as easing global financial conditions, the negative output gap will close in the second half of the year, said OCBC’s Ling.
MAS’ forecast is in line with OCBC’s 2024 full-year growth estimate of 2.9 per cent – though Ling noted that the third-quarter advance growth estimate could be revised down “a tad” when the September data is released.
She expects fourth-quarter growth to come in at 2.3 per cent, and forecasts 2025 full-year growth of 2.7 per cent.
“But given the key uncertainties pertaining to geopolitics, including the United States election outcome, and Chinese-related policy implications, it is plausible that the official 2025 GDP growth forecast could still be at the familiar 1 to 3 per cent year-on-year range,” she added.
HSBC analysts Yun Liu and Joey Chew maintained their full-year growth forecast of 3 per cent, but cautioned that the uneven recovery “warrants a close watch, as manufacturing growth has big swings in headline GDP growth”.
