PRIVATE-sector economists lowered their forecast for Singapore’s 2024 growth and raised inflation expectations, in the latest quarterly survey of professional forecasters published by the Monetary Authority of Singapore (MAS) on Wednesday (Dec 13).

The median forecast for economic growth in 2024 was 2.3 per cent, down from the forecast 2.5 per cent in the previous quarter’s survey.

While there is now cautious optimism for next year on improved manufacturing and non-oil domestic exports (NODX) readings, economists are mixed on the extent of the improvement, said CGS-CIMB economic adviser Song Seng Wun.

The upturn will likely be gradual and fragile, DBS economist Chua Han Teng warned, due to the still uncertain global economic environment.

Inflation in 2024 is now expected to come in at 3.4 per cent for headline inflation – up from 3.1 per cent in last quarter’s survey – and 3 per cent for core inflation, up from 2.8 per cent before.

Maybank economist Chua Hak Bin reinforced his view of sticky inflation in 2024. Disinflation will probably pause in H1, due to a tight labour market, goods and services tax hike, carbon taxes, property taxes and other administrative prices, he said.

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DBS’ Chua agreed that “domestic inflationary impulses” may lift core inflation temporarily in early 2024, with the moderating inflation path likely to be bumpy.

Though gloomier than the last survey, the updated 2024 expectations are aligned with official forecasts.

The government expects GDP growth of 1 to 3 per cent in 2024. Headline inflation is projected at 3 to 4 per cent, and core inflation at 2.5 to 3.5 per cent.

The latest survey was sent to 26 professional forecasters on Nov 22, and received 25 responses. The survey reflects their views and not those of the MAS.

Gloomy 2023 estimates

For 2023, the median forecast for full-year GDP growth remained at 1 per cent, in line with the official forecast of “around 1 per cent”.

This was despite Q3 GDP growth exceeding expectations at 1.1 per cent, a hair above respondents’ median forecast of 1 per cent in the September survey. For Q4, respondents expect the economy to expand 1.8 per cent.

Respondents indicated that the most likely growth range for 2023 is 1 to 1.9 per cent, with a 50 per cent chance of this.

Compared to September’s survey, the full-year 2023 estimate worsened for most components of GDP, excepting construction and accommodation and food services.

In particular, manufacturing is expected to fall 4.6 per cent year on year, worse than the previously predicted 4.4 per cent decline. NODX is similarly expected to contract 12 per cent, deeper than the 10.5 per cent predicted previously.

But Song believes that these indicators have likely troughed, with recent manufacturing and trade data pointing to an upswing in the worldwide semiconductor market.

The median forecast for 2023’s headline inflation edged up to 4.8 per cent, from 4.7 per cent previously. The outlook for core inflation, which excludes accommodation and private transport, remained at 4.1 per cent.

MAS forecasts headline inflation of around 5 per cent and core inflation of around 4 per cent for the full year.

For Q4, respondents expect headline inflation to come in at 4 per cent, and core inflation at 3.1 per cent.

Monetary policy changes seen later in 2024

Despite marginally more pessimistic growth and inflation outlooks, all respondents expect monetary policy to remain unchanged in January’s upcoming policy meeting – the first in MAS’ new schedule of quarterly rather than biannual meetings.

But some respondents think that policy tweaks could come in later decisions. Some 13 per cent expect policy to be loosened in April by reducing the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band. Separately, 21.7 per cent expect this move to come in July, and 18.2 per cent expect it in October.

No respondents expect an increase in the slope in 2024, but one expects the slope of the S$NEER to be flattened in October.

No respondents expect the policy band to be re-centred, nor its width to be adjusted, in the first three quarters of 2024. But one respondent predicts downward re-centreing in the October review.

In its April and October meetings in 2023, MAS kept policy unchanged, after five successive tightening moves in 2021 and 2022.

External growth remains top risk to forecasts

External growth remained the most-cited risk to the domestic outlook: both the downside risk of an external growth slowdown, and the upside risk of better-than-expected external growth.

Eyes are on key markets such as the US, Song said. While fingers are crossed for a soft landing, there is still a degree of uncertainty about growth in 2024, with a technical recession or even “something more severe” not ruled out because of higher costs of borrowing.

An external growth slowdown was named as a downside risk by 81.3 per cent of respondents, up from 68.8 per cent in the last survey. It was cited as the top risk by 31.3 per cent of those surveyed.

Other oft-cited downside risks were geopolitical tensions, inflationary pressures and spillovers from weaker China growth.

For upside risks, 60 per cent flagged better-than-expected external growth, unchanged from September.

However, this was no longer the top upside risk, with 20 per cent of respondents naming it so. Instead, the tech cycle recovery – cited by 53.3 per cent of respondents – was cited as the top risk by 33.3 per cent.