Singapore non-oil exports showing recovery signs, GDP may grow 2.4% this year: HSBC
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A worsening shipping crisis in the Red Sea could hit Singapore’s economic growth, warns HSBC’s chief Asia economist.
ST PHOTO: JASON QUAH
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SINGAPORE – The Singapore economy is expected to grow at a projected 2.4 per cent in 2024 from an estimated 1.2 per cent last year on the back of a travel recovery and an improvement in global trade, HSBC said on Jan 18.
The Government forecasts that the economy will expand at between 1 per cent and 3 per cent in 2024.
Mr Frederic Neumann, HSBC’s chief Asia economist and co-head of global research in Asia, believes Singapore’s non-oil domestic exports are showing signs of a recovery, but he remains cautious given semiconductor shipments are still falling.
“Like other export-oriented economies, Singapore’s external sector remains sensitive to the global trade cycle. These headwinds continue to pose downside risks to growth,” said Mr Neumann.
Growth could also be hit by about 0.2 percentage points if the Red Sea crisis worsens and results in a prolonged shutdown in shipping that disrupts supply chains,
However, the inflationary impact from the Red Sea turmoil will be less direct and felt mainly in higher rising energy prices.
There are many other variables as well, including China growing faster than expected, that could cushion the potential impact on Singapore’s growth, Mr Neumann said.
Attacks by Iran-backed Houthi militia on ships in the Red Sea
One of the brighter lights on the economic horizon for 2024 lies in travel, with related sectors here being underpinned by a robust recovery in Chinese visitors, a trend that is expected to grow further in coming months.
Regional growth is also set to pick up in many of Asia’s smaller and more open economies, even if the larger ones pull back, Mr Neumann said.
Asia’s real gross domestic product (GDP) is expected to grow at an average of 4.1 per cent in 2024, compared with a projected 4.4 per cent expansion in 2023.
Japan could deliver higher than expected growth, thanks to a generous fiscal stimulus, Mr Neumann noted, while China’s economy is expected to expand at around 4.9 per cent this year, a touch slower than in 2023.
Its property sector will remain a drag for some time yet, but there are pockets of growth driven by support for areas like manufacturing investment.
Growth in Hong Kong could also slow as the tailwinds from the reopening from the pandemic fade.
India could see slower expansion but still lead much of the region even as sticky inflation exerts a drag, but there could be interest rate cuts just when the country holds national elections.
Indonesia, which is facing elections as well, could see growth ticking along and household spending picking up steam.
Thailand is grappling with weak investment, but fiscal easing offers a welcome boost, while Malaysia should see improvements as well, helped by steadying exports.
The Philippines is on course to deliver another impressive year, achieving the second-highest growth rate in Asean after Vietnam, which should enjoy a snap-back from a challenging 2023.
Mr Neumann warned that trade might remain hampered by subdued demand in key markets.
Like in the United States, most central banks in Asia will shift to cutting interest rates or other means to ease money supply.
The monetary reins in Singapore, India and Indonesia may be loosened even before the US Federal Reserve moves. Others such as Australia, Thailand and Malaysia may wait until 2025, or even longer, before cutting interest rates.
Japan’s central bank may embark on a gradual normalisation of monetary policy, as the government will be more concerned about overtightening than about moving too slowly after years of tussling with deflation, Mr Neumann said.
