The International Monetary Fund (IMF) is keeping its 2024 growth forecast for Singapore unchanged at 2.1%, despite the country’s 2023 GDP growth coming in 0.1 percentage points (ppt) higher than its 1.0% forecast in October 2023.
Growth slowed last year with weaker global demand for goods, but Singapore’s export sector is now benefiting from strengthening global demand, “noticeably in semiconductors”, says Thomas Helbling, deputy director of the IMF’s Asia and Pacific Department.
Speaking at the release of the IMF’s latest regional economic outlook for the Asia Pacific on April 30, Helbling expects a “marked improvement” out of Singapore this year. “Singapore today is [a] much more services-oriented economy…as Asia continues growing rapidly. Singapore is [a] financial hub, logistics services hub. The service sector will grow in line with growth in the region.”
At last October’s briefing, an IMF representative said Singapore should see an ongoing recovery, “especially in services”, which will contribute to “medium-term potential growth” of 2.5% in 2025.
In its latest biannual report, however, the IMF trimmed its 2025 GDP growth forecast for Singapore by 0.2 ppt to 2.3%.
This is but a “technical correction” to align export growth projections with the IMF’s global forecast, says Helbling to The Edge Singapore. “There hasn’t been any medium-term cut, really. We still see potential growth for Singapore at about 2.5%.”
See also: From 2023: Singapore's 2023 GDP forecast kept at 1%, inflation at 5.5%: IMF
On inflation, the IMF had forecast 2023 inflation to come in at 5.5%, down from 6.1% in 2022. The actual all-items CPI came in lower, at 4.8%. That said, the IMF is sticking to its forecast for Singapore’s inflation to hit 3.5% and 2.5% for this year and the next respectively.
Revising China’s forecast
See also: IMF keeps Singapore’s 2024 GDP growth forecast at 2.1%, trims 2025 outlook slightly
For the current year, the IMF expects Asia and Asean to post GDP growth of 4.5% and 4.6% respectively. The IMF’s Asia growth forecast is 0.3 ppt higher than its last forecast six months ago, while its Asean forecast is unchanged.
The outlook for the Asia Pacific has brightened, even as the region is marked by both resilient growth and rapid disinflation, says Krishna Srinivasan, director of the Asia and Pacific Department at the IMF. “Growth is better than previously projected but will slow from 5% in 2023 to 4.5% in 2024. The region remains inherently dynamic and accounts for about 60% of global growth.”
Srinivasan warns of disinflation throughout the region. In Australia and New Zealand, disinflation remains above target, he adds. In emerging markets and Japan, it is at or close to central bank targets. In China and Thailand, however, there are deflation risks.
Thailand’s 1.9% growth last year came in 0.8 ppt lower than IMF’s forecast, the widest miss among the Asean-5. China, however, beat estimates by 0.2 ppt with 5.2% growth last year.
“Fiscal stimulus enacted last October and in March helped mitigate the impact of declining manufacturing activity and sluggish services,” says Srinivasan.
The IMF has raised its 2024 growth estimate for China to 4.6%, up 0.4 ppt, while keeping 2025 projections at 4.1%. This could change; Srinivasan says China’s “stronger than expected” 1Q2024 growth of 5.3% came in after the IMF had completed its latest forecast. Thus, the IMF’s projections “may be revised upward”.
“At the same time, you have factors like the real estate sector, where the weakness continues. So, there are offsetting forces,” he adds.
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One of the biggest risks for Asia’s economy is a protracted property sector correction in China, says Srinivasan. This would weaken demand and could increase the odds of sustained deflation, he adds, with direct trade spillovers and falling export prices from China affecting the region.
According to Srinivasan, a 1 ppt increase in Chinese growth leads to a 0.3 ppt increase over the medium term in the region’s economies. This means China’s policy response matters — for both itself and the entire region, he adds.
“A policy package that accelerates the exit of nonviable property developers, promotes the completion of housing projects and manages debt risks of local governments would boost confidence, support demand and help the economy reflate.”
Photos: IMF
