Singapore’s real consumer spending is expected to grow of a slower pace 2.8 per cent next year, Mastercard Economics Institute (MEI) predicted.

Amid inflationary pressures, consumer spending will rise at a slower pace in 2024, from a 3.5 per cent growth rate in 2023, said MEI in its annual economic outlook released on Friday (Dec 15).

Despite weakening consumers’ purchasing power, MEI expects Singapore’s economy to grow faster in real terms in 2024 by 2.7 per cent, up from 0.9 per cent in 2023, driven by a stablisation in external trade.

While interest rates, wages and prices are higher than pre-pandemic levels, consumers have become more prudent in purchases to manage living costs and debt servicing.

MEI found that Singapore consumers in 2023 allocated a smaller share of their money to discretionary spending compared to 2019, and spent more on essentials than they did pre-Covid.

Its data showed that Singaporeans in general spent 5 per cent less on travel and entertainment, and 4.5 per cent more on groceries. The affluent, at the same time, spent 2 per cent less on travel and entertainment, and 2.1 per cent more on grocery.

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A more cautious spending trend will apply beyond the republic.

“The global economy will feel more ‘normal’ in 2024 than the prior three years; however, it is still an economy in the process of rebalancing,” said MEI.

“This means consumers and businesses will face crucial decisions about spending and investing, where price differentials and interest rates have impacted household budgets.”

Asia-Pacific (Apac) consumers, however, are expected to allocate more money to discretionary spending in 2024, contrary to the highly inflationary environment in the two years before, when essential goods took a larger portion of their household budgets.

They are anticipated to spend more on goods such as electronics, household appliances and clothing, reviving the region’s manufacturing sector in 2024.

“In aggregate, MEI expects Apac consumer spending to be resilient, supported by tight labour markets and a catch up of inflation-adjusted wages,” it said.

MEI also highlighted that further recovery of Chinese outbound travel in 2024 will support global tourism spending.

David Mann, Mastercard’s chief economist of Asia-Pacific, said early mainland tourists are now spending more on experiences such as entertainment and dining, compared to shopping for luxury goods before the pandemic. “This shift in travel spending priorities suggests that tourism authorities and retailers globally may have to adapt their strategies to maintain their appeal to Chinese visitors.” 

MEI noted that the recovery of specific corridors will hinge on the Chinese authorities’ prioritisation of flight capacity allocation.

“While South-east Asia destinations such as Singapore, Malaysia, Vietnam and Thailand were early outperformers in 2023, it is expected that destinations in North-east Asia, North America and Europe should catch up in 2024,” the research house predicted.

*Amendment note: The table has been amended to show that the wallet share comparison is made between Sep 19 and Sep 23.