Singapore economy beats forecasts in Q4 2024 but analysts see tougher 2025 growth outlook

SINGAPORE - The Singapore economy may have outperformed official forecasts and market expectations in 2024, but economists see a more challenging outlook for growth in 2025.

The cautious stance comes as advance estimates from the Ministry of Trade and Industry (MTI) on Jan 2 show the economy expanded 4.3 per cent year on year in the fourth quarter of 2024.

While lower than the 5.4 per cent growth in the previous quarter, the figure beat the 3.8 per cent growth forecast by economists in a Bloomberg poll.

On a quarter-on-quarter seasonally adjusted basis, the economy expanded 0.1 per cent, down from the 3.2 per cent growth in the third quarter of 2024.

For full-year 2024, the economy grew 4 per cent, MTI said, reiterating the figure announced by Prime Minister Lawrence Wong in his Dec 31 New Year message.

This was the highest growth since 2021 and comes after 2023’s 1.1 per cent increase. It also beat MTI’s forecast of around 3.5 per cent made in November.

MTI did not give a new forecast for 2025 growth but said in November that it sees growth slowing to a range of 1 per cent to 3 per cent. It flagged downside risk from a further escalation of geopolitical conflicts and higher uncertainty over US trade policies under the incoming Trump administration.

OCBC Bank’s chief economist Selena Ling said 2024 was a “blockbuster” year, but the 2025 outlook is still largely obscured by external headwinds such as the anticipated Trump 2.0 tariffs, US-China strategic rivalry, and geopolitical tensions.

“Due to the higher growth base in 2024, we shade down our 2025 gross domestic product growth forecast from around 2.7 per cent year on year to 2.2 per cent year on year,” she said.

Ms Ling noted that there might be greater optimism about the global electronics improvement, but trade sentiments remain on edge as the Trump administration is expected to enact wide-ranging and possibly punitive tariffs on trade with China and also the rest of the world.

She said the timing and magnitude of the anticipated tariffs are uncertain, but the first quarter traditionally sees a moderation in activity due to the Chinese New Year holiday.

The next milestone to look out for would be Budget 2025 on Feb 18, with expectations running high for assistance to help people with cost-of-living issues and job security, said Ms Ling.

Standard Chartered Bank economist Jonathan Koh tipped 2025 growth at 2.5 per cent, with a caution that an uncertain global trade outlook may damage growth sentiment in trade-reliant places such as Singapore.

DBS Bank economist Chua Han Teng maintained the bank’s 2025 growth forecast at 2.8 per cent.

He added that while Singapore’s economy has room for growth in 2025, there are considerable downside risks and uncertainties in the months ahead, such as intensification of geopolitical and trade tensions that could disrupt global production and raise costs.

Growth in the final quarter of 2024 came on the back of better performances in the services and construction industries.

In particular, the wholesale and retail trade as well as transportation and storage sectors collectively grew by 5.6 per cent year on year in the final quarter, extending the 5.2 per cent growth in the previous quarter. In this group, the retail industry was the only one to shrink.

Driven by public sector projects, the construction sector expanded 5.9 per cent year on year in the fourth quarter, faster than the 4.7 per cent growth in the third quarter.

The manufacturing sector grew 4.2 per cent, led by electronics and transport engineering. But growth was much slower than the 11.1 per cent expansion in the third quarter.

Growth in the information and communications, finance and insurance, as well as professional services sectors also slowed to 3.7 per cent in the fourth quarter, from 4.3 per cent in the third quarter.

But accommodation and food services, real estate, administrative and support services, as well as other services, saw faster expansion. They collectively grew 2.6 per cent in the fourth quarter, from 1.4 per cent growth in the previous quarter.

Barclays economist Brian Tan said manufacturing activity is pulling back after the outsized third-quarter spike. Still, manufacturing activity appears relatively elevated and is, therefore, at risk of further normalisation or slowing, he said.

Mr Tan raised his 2025 growth forecast slightly to 2 per cent from 1.8 per cent, putting it in the upper half of MTI’s 1 per cent to 3 per cent forecast range. However, he maintained Barclays’ 1.5 per cent projection for 2026.

Said Mr Tan: “While gross domestic product growth has indeed been surprising on the upside in the recent quarters, we remain wary of how elevated manufacturing output levels still look after the third-quarter surge and expect further normalisation.

“This is especially so given the next US administration is likely to significantly escalate global trade tensions – a particularly acute pain point for ultra-open Singapore.”