SINGAPORE – Private-sector economists lowered their 2024 growth expectations for export-driven Singapore mainly because of the heightened risk of a global economic slowdown.
The Republic’s gross domestic product (GDP) growth was projected at 2.3 per cent in 2024, down from an earlier prediction of 2.5 per cent, according to a quarterly survey of professional forecasters released by the Monetary Authority of Singapore (MAS) on Dec 13.
Eighty-one per cent of the 25 economists who responded to the MAS survey sent out in November ranked spillovers from an external growth slowdown as the top downside risk to the outlook for Singapore’s economy.
The respondents also flagged geopolitical tensions, inflationary pressures and spillovers from weaker growth in China – Singapore’s top trading partner – as other risks to the domestic growth outlook.
Conversely, 60 per cent of the survey respondents thought Singapore’s economic fortunes could improve in 2024 if external growth came in better than expected. Some of the economists also flagged a likely recovery for the Republic’s electronics exports and more robust growth in China as among factors that may contribute to a positive GDP outcome in 2024.
The Ministry of Trade and Industry (MTI) in November projected that Singapore’s economy would grow between 1 per cent and 3 per cent in 2024 as its trade-related sectors improve modestly. However, MTI also flagged the risk that cumulative effects of higher interest rates and a slower-than-expected Chinese economy may keep overall global growth depressed next year.
The respondents to the MAS survey kept their 2023 GDP forecast of 1 per cent growth unchanged from the previous one, which was released in September.
The 2023 forecast in the survey is consistent with MTI’s estimate of around 1 per cent GDP growth in 2023.
Mr Chua Han Teng, an economist at DBS Bank, said the acceleration of GDP growth in 2024 from 2023 predicted by the survey was in line with his view and close to his forecast of 2.2 per cent.
He told The Straits Times: “We expect Singapore’s growth to rise, but it hinges on better performance from external-oriented sectors such manufacturing, wholesale trade and financial services.
“We think the upturn is likely to be gradual and fragile... The global economic landscape is still complicated, amid high interest rates in advanced economies and bumpy conditions in China, while lingering geopolitical tensions could still disrupt supply chains.”
While a majority of the forecasters were hopeful that both all-items inflation and core inflation – which excludes private transport and accommodation costs – will ease in 2024, they upped their projections for the pace of price change from the previous survey.
They predicted all-items inflation of 3.4 per cent, compared with their earlier forecast of 3.1 per cent. Core inflation was seen running at an average of 3 per cent in 2024, faster than the pace of 2.8 per cent they had projected in September.
The survey forecasts were, however, within MAS’ estimates of 3 per cent to 4 per cent for all-items inflation, and 2.5 per cent to 3.5 per cent for core inflation.
For 2023, the survey showed all-items inflation coming in at 4.8 per cent, less than the 5 per cent average estimated by MAS. Core inflation this year was projected at 4.1 per cent, higher than the MAS forecast of 4 per cent.
DBS also expects Singapore’s inflation to rise at a slower pace in 2024.
“But the path is likely to be bumpy, especially in early 2024, when we see domestic inflationary impulses that will lift core inflation temporarily, for instance, from the 1 percentage point goods and services tax hike to 9 per cent from January,” said Mr Chua.
He expects 2024 all-items inflation to average at 3.5 per cent, and core inflation at 3.1 per cent.
On key financial indicators, 57 per cent of the survey respondents anticipated higher corporate profitability in 2024, better than the steady profits they expect this year.
Private residential property prices were seen by 43 per cent as declining in 2024. But the same proportion of forecasters saw them rising in 2024.
None of the respondents expected any change in MAS’ tight monetary policy stance in the upcoming January 2024 review. However, some predicted that the stance will start to shift towards easing from the April meeting onwards.
