Several analysts have raised their 2024 gross domestic product (GDP) growth forecasts following the Ministry of Trade and Industry’s (MTI) advanced estimates of Singapore’s 2024 GDP.
RHB Bank Singapore analysts Barnabas Gan and Laalitha Raveenthar have upgraded their 2024 full-year GDP growth forecast for Singapore to 3%, up from 2.5% while UOB analyst Jester Koh has raised his forecast to 3.3% from 2.9%.
Oxford Economic analyst Sheana Yue has upgraded her growth forecast in Singapore to 2.8%, from 2.5% previously, in line with the upper end of the 2% to 3% forecast range this year.
Fitch Solutions has also increased its 2024 GDP growth forecast from 2.6% to 3.1%, while DBS analysts Chua Han Teng and Philip Wee have increased their 2024 GDP growth forecast to 3.5% from 2.7% previously.
RHB’s Gan and Raveenthar attribute the upgrade in GDP growth to the 3Q2024 empirical estimates exceeding market expectations, an optimistic outlook in the manufacturing sector for the year ahead and an improving global and domestic economic landscape.
Meanwhile, OCBC analyst Selena Ling forecasts that the Singapore economy will expand by 2.3% y-o-y in 4Q2024, with 2024 headline and core inflation forecast remaining at 2.6% and 2.9% y-o-y, respectively before falling to 2% y-o-y for both in 2025.
See also: Analysts maintain positive outlook on manufacturing sector in 2024 despite slowdown in IP
Maybank analysts Chua Hak Bin and Brian Lee have maintained their 2024 GDP growth forecast of 3.5%.
2025 GDP growth forecasts
However, the analysts remain cautious heading into 2025 due to key uncertainties such as geopolitical tensions, potential protectionist policies and China’s economic outlook.
OCBC’s Ling notes that “MAS statement sounds more sanguine on near-term growth, but still flags downside growth risks in 2025 due to external uncertainties including potential increase in tariffs and interest rates being kept high.”
As such UOB’s Koh has lowered his 2025 GDP growth forecast to 2.9% from 3.2% previously while OCBC’s Ling maintains her forecast of 2.7% y-o-y should all things remain equal. However, given the uncertainty, she notes that it is possible for official 2025 GDP growth forecast to be at the 1% to 3% y-o-y range.
On the other hand, DBS’s Chua and Wee have increased their 2025 GDP growth forecast to 2.8% from 2.5% previously, as they expect the global economic expansion to hold up despite external uncertainties.
Fitch Solutions and Maybank have maintained their 2025 GDP growth forecast at 2.4% and 2.5%, respectively.
Impact of MPS on S$NEER
Following Monetary Authority of Singapore’s (MAS) latest monetary policy statement, the USD/SGD traded around the 1.3050 region, with the Singapore dollar nominal effective exchange rate (S$NEER) at around +1.9%.
Analysts have mixed sentiments on MAS’s policy stance heading into 2025.
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OCBC’s Ling notes that MAS is not in a rush to ease monetary policy settings presently, leaving the window open in 2025.
Meanwhile, RHB’s Gan and Raveenthar expects MAS to keep its policy parameters unchanged in 1H2025, adding that the current S$NEER policy band is appropriate for maintaining Singapore’s price pressures.
On the other hand, UOB analyst Jester Koh expects a slight reduction by 50 basis points (bps) to the S$NEER slope in the Jan or April 2025 monetary policy statement, with no further adjustments for the remainder of 2025.
Given the output gap closing in 2H2024 and increased economic activity, UOB’s Koh notes that demand-side inflationary risks may persist. As such, “MAS may adopt a more cautious approach to policy normalization only when y-o-y core inflation is very close to desired levels (around 1.8%) and possibly when GST-effects have completely washed out,” UOB’s Koh adds.
This is supported by Oxford Economic’s Yue who notes that “most signs point to the MAS loosening monetary policy settings in 1H2025”, with a MAS’s first move expected in Jan or April 2025.
While Oxford Economic’s Yue expects the S$NEER to strengthen slightly, she adds that “the MAS will move towards a neutral path and for exports to remain modest, suggesting the S$NEER will soften before long, moving from its current position near the top of the policy band to the lower half.”
Similarly, Standard Charted analysts Edward Lee and Jonathan Koh maintain their call of a status quo decision in Jan 2025, with risks of any changes leaning towards easing. They expect the S$NEER to continue to trade in the 1% to 1.5% range above the mid-point.
Fitch Solutions expects MAS to maintain all policy settings until the April 2025 review, at the earliest.
Maybank’s Chua and Lee expect MAS to ease the monetary policy via a slight reduction of the S$NEER slope in Jan 2025, however, they do not rule out the possibility of an April 2025 easing instead.
DBS’s Chua and Wee note that “the timing of easing the S$NEER’s appreciation pace in 2025 hinges on inflation’s progress back into the historically comfortable range.”
However, their base case sees a constructive scenario, which will slightly reduce the appreciation pace of the S$NEER policy band, they also expect USD/SGD to move into the 1.25-1.30 range in 2025.
