Economists keep 2.4% forecast for Singapore’s growth, but expect less from manufacturing, survey finds
Economists’ forecasts have been lowered for headline inflation, but maintained for core inflation
PRIVATE-SECTOR economists’ forecasts of Singapore’s growth in 2024 have stayed unchanged, at a median of 2.4 per cent, in the latest quarterly survey of professional forecasters published by the Monetary Authority of Singapore (MAS) on Wednesday (Jun 12).
But while the overall prediction was the same, forecasts have shifted for specific growth drivers: Manufacturing is now expected to play a smaller role.
Survey respondents now expect manufacturing to grow 1.6 per cent this year, down from 4 per cent in the last survey.
This reflects the lacklustre industrial production performance in the first few months of 2024, said UOB senior economist Alvin Liew and DBS economist Chua Han Teng.
For full-year inflation numbers, the median forecast for headline inflation fell to 2.8 per cent, down from 3.1 per cent in last quarter’s survey; the forecast for core inflation remained at 3 per cent.
The latest expectations remain aligned with official forecasts. The government expects gross domestic product (GDP) growth to be between 1 and 3 per cent in 2024, and for both headline and core inflation to be between 2.5 and 3.5 per cent.
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The latest survey was sent to 26 professional forecasters on May 23, and received 20 responses. The survey reflects their views and not those of MAS.
Differing by sector
Compared to March’s survey, economists’ growth predictions have risen for three of five major sectors.
Finance is expected to have the highest growth, which DBS’ Chua believes will be supported by an uptick in credit demand, given the anticipated easing in global interest rates. Improved performances are also anticipated for wholesale and retail trade, as well as accommodation and food services.
In contrast, economists took a dimmer view of construction, along with manufacturing.
In line with poorer expectations for manufacturing, the growth forecast for non-oil domestic exports worsened to 4 per cent, from 6 per cent.
But the expected overall unemployment rate for the year stayed at 2.1 per cent.
In Q2 2024, GDP is expected to rise 2.7 per cent on the year, the same growth rate as in Q1. Headline inflation in Q2 is predicted to be 2.8 per cent year on year, and core inflation is forecast at 3 per cent.
Chua noted that forward-looking indicators point to manufacturing’s recovery from Q1’s weak start, with electronics output likely benefitting from the ongoing global tech upturn.
Underlying end-demand fundamentals remain intact, driven by the structural boost from generative AI-related applications, as well as supportive base effects, added Liew.
DBS and UOB forecast GDP growth of 2.2 per cent and 2.9 per cent, respectively, for the full year.
Liew is more optimistic about H2. He foresees a potentially “more meaningful recovery” then, should the Federal Reserve commence its rate-cut cycle, which the bank believes will start in September. This may stimulate investment and consumption activity abroad, he said.
Meanwhile, in addition to an improved performance by electronics, Singapore may experience positive spillovers from China, he added. Recent moves were taken there to target large-scale equipment renewals and trade-ins of durable consumer goods, and to stabilise the property market.
But Liew expects growth in tourism-related sectors to moderate.
No change to policy
Given the latest outlooks for growth and inflation, most respondents expect monetary policy to remain unchanged in July’s upcoming policy meeting – the third in MAS’ new schedule of quarterly, rather than twice-yearly, meetings.
Only 11.1 per cent of respondents in the latest survey expect policy to be loosened in July through a reduction in the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band. Just 6.3 per cent of respondents anticipate this move in October.
No respondents expect a change in the level at which the S$NEER policy band is centred in July, down from one respondent in the previous survey. Only 6.3 per cent believe such a move will take place in October.
Similar to the last survey, no respondents expect an adjustment to the width of the S$NEER this year.
After five successive tightening moves in 2021 and 2022, MAS has kept policy unchanged in its 2023 and 2024 meetings so far.
Asked about the risks to their current forecasts, 57.1 per cent of the economists cited spillovers from geopolitical tensions, making it the most-cited downside risk. This was up from 50 per cent in March’s survey, where it tied with an external growth slowdown as the most-cited downside risk.
Other downside risks – inflationary pressures, an external growth slowdown and China’s weaker growth – were each flagged by half of the respondents in the latest survey.
Geopolitical tensions and inflationary pressures were most often cited as the top risk to the economy, with 21.4 per cent of respondents each.
For upside risks, more robust growth in China was cited the most, by 71.4 per cent of respondents, up from 50 per cent in March.
But only 14.3 per cent of respondents thought this was the top upside risk. Instead, half of them said the top upside risk was faster-than-expected recovery in the tech cycle. This was cited by 64.3 per cent of respondents as an upside risk in general.
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