Economists’ Singapore growth forecast jumps for 2024, but only edges up for 2025: survey

PRIVATE-SECTOR economists’ median forecast for full-year 2024 growth climbed significantly after the third quarter’s growth surprise – but 2025 growth only picked up slightly, based on the latest quarterly survey of professional forecasters published by the Monetary Authority of Singapore (MAS) on Wednesday (Dec 11).

Their inflation expectations for both years were also lowered, compared with the previous quarter’s survey.

The consensus forecast for gross domestic product growth this year rose to 3.6 per cent in December’s survey, from 2.6 per cent in the preceding poll. Manufacturing expectations, in particular, strengthened significantly.

This aligned with the Ministry of Trade and Industry’s upward revision of growth to “around 3.5 per cent” in November, from the 2 to 3 per cent range projected in August, said DBS economist Chua Han Teng.

“The more optimistic growth anticipation reflects Singapore’s economic outperformance, particularly in H2 2024,” he said. GDP rose by a higher-than-expected 5.4 per cent year on year in Q3, exceeding advance estimates and respondents’ median forecast in the previous survey.

Jonathan Koh, economist and foreign exchange (FX) analyst, Asia, Standard Chartered Bank, said that considering this outperformance, even if Q4 were to post flat growth quarter on quarter, full-year GDP growth year on year would still be much higher than previously forecast.

But for 2025, the median forecast in the most recent survey was 2.6 per cent, up slightly from September’s 2.5 per cent.

While the prediction was little changed, respondents see greater downside risks to the outlook, noted Chua. He highlighted the higher probabilities assigned to real GDP growth falling below 2 per cent in the December poll, versus in September.

Still, the latest forecast was generally in line with the official GDP growth forecast of between 1 and 3 per cent.

Both headline and core inflation predictions by private-sector economists for 2024 have come down slightly. Headline inflation is now expected at 2.5 per cent – slipping from 2.6 per cent in the previous quarter’s survey – while the forecast for core inflation dipped to 2.8 per cent, from 2.9 per cent before.

Officially, headline inflation in 2024 is anticipated to come in around 2.5 per cent; and core inflation, 2.5 to 3 per cent.

Similarly, the headline inflation forecast in December’s survey for full-year 2025 was 1.9 per cent, down from 2 per cent in the previous quarter’s survey. The projection for core inflation was 1.8 per cent, down from 2 per cent previously.

In 2025, the government expects both headline and core inflation to be between 1.5 and 2.5 per cent.

The latest survey was sent to 25 professional forecasters on Nov 22 – after the US elections on Nov 5 – and received 20 responses. The survey reflects their views and not those of MAS.

Sectoral differences

Compared with September’s survey, economists’ growth predictions rose for two of five major sectors in 2024: manufacturing, as well as wholesale and retail trade.

While the latest forecast for manufacturing was notably higher than in the previous survey, finance and insurance is still expected to have the highest growth among the sectors, even as it slipped from before.

Despite the much-improved expectations for manufacturing, the growth forecast for non-oil domestic exports worsened.

The expected overall unemployment rate for the year fell slightly.

In the fourth quarter of 2024, GDP is expected to rise 3.1 per cent year on year, below the rate charted in Q3. Headline inflation in Q4 is predicted to be 1.8 per cent on year, and core inflation is forecast at 2.1 per cent.

Monetary policy stays put

Most respondents expect monetary policy settings to remain unchanged in January’s upcoming policy meeting.

In the latest survey, 33.3 per cent of respondents expect policy to be eased in January, via a reduction in the slope of the Singapore dollar nominal effective exchange rate (S$NEER) policy band, down from half the respondents in the previous survey.

But a larger proportion – 11.1 per cent, against September’s 5.6 per cent – expect a lowering of the level at which the S$NEER policy band is centred.

Meanwhile, similar to the September survey, 5.6 per cent of the economists polled predict a widening of the band in January.

In its two meetings in 2023, as well as its four reviews in 2024, MAS kept policy unchanged, after five successive tightening moves in 2021 and 2022.

Geopolitical risks rising

Geopolitical tensions – including those from higher tariffs – emerged as the most-cited downside risk to the domestic outlook, flagged by all respondents, compared with 66.7 per cent before. It was also cited as the top risk by all respondents in the latest survey.

This was unsurprising, following the election of Donald Trump as the 47th US president, said Chua, noting Singapore’s trade dependency.

“Trade policy uncertainty – already rising before the US elections – is likely to be elevated, with Trump 2.0 promising a wider trade war. We therefore also assess significant downside risks to Singapore’s economic growth from the potential effects of higher tariffs and elevated policy uncertainty, especially if global economic growth and trade slow discernibly, as they did in 2019 under Trump 1.0,” he said.

Koh agreed that the uncertain global trade outlook may damage growth sentiment in Singapore. “Trade-related sectors may face headwinds in 2025, after a likely strong H2 2024,” he said.

He added that negative trade policies could lead to higher inflation in the US. This may mean higher US interest rates and a stronger US dollar.

“As a result, Asian central banks focused on FX stability may have to scale back their rate-cutting cycles,” he said.

Other downside risks in the survey included weaker growth in China and domestic cost pressures.

For upside risks to Singapore’s outlook, better-than-expected external growth was the most-cited, though this fell to 64.3 per cent in the latest survey, from 73.3 per cent in September. Only 21.4 per cent of economists polled thought that it was the top upside risk.

Respondents also highlighted more robust growth in China and a sustained tech-cycle upturn as key upside risks. The latter was cited as the top risk by 35.7 per cent of participants who responded to this question.