Economists from DBS Group Research, UOB Bank and OCBC Bank have raised their 2024 real GDP growth forecasts following the Ministry of Trade and Industry’s (MTI) release on 3Q2024 GDP growth.
For 3Q2024, Singapore’s GDP growth was revised upwards to 5.4% y-o-y seasonally adjusted from the advance estimates of 4.2% y-o-y. This was driven by September’s industrial production outturn, stronger-than-expected services and construction activity.
The ministry has upgraded its 2024 growth forecast to around 3.5% from 2%-3% previously. MTI also introduced a 2025 growth forecast range of 1%-3%, implying a mid-point of 2%.
To this end, DBS’s Chua Han Teng, UOB’s Jester Koh and OCBC’s Selena Ling have raised their 2024 GDP growth forecasts to 3.8%, 3.5% and 3.6% respectively.
For 3Q2024, services activity grew 4% y-o-y. This resilience was driven by trade-related clusters (manufacturing, wholesale trade, transportation and storage) bolstered by the ongoing upturn in the electronics and broader goods trade cycle, UOB’s Koh notes.
The wholesale trade sector grew to 4.9% y-o-y, while activity in transportation and storage accelerated to 7.5% y-o-y in 3Q2024.
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Conversely, growth in the modern services cluster – finance and insurance, information and communications, professional services – saw a slight moderation across the board.
DBS’s Chua expects “steady expansion in these external-oriented sectors” in the coming months given resilient external demand, even as risks are tilted to the downside.
That said, tourism-related services remained tepid, faced by challenging ytd recovery in tourist arrivals to pre-pandemic levels, lower tourism receipts per capita and worsened by diversion of resident spending abroad due to the stronger Singapore dollar. Looking ahead, Koh expects activity in tourism-related segments to soften as tailwinds from the post-pandemic pent-up demand for these services dissipate.
Accommodation saw a slight uplift to 3.7% y-o-y while retail trade as well as food and beverage services both contracted by 0.7% y-o-y.
By expenditure, 3Q2024 GDP was led by private consumption bolstered by a tight labour market alongside cooling inflationary pressures and higher public consumption.
For the domestic labour market, the overall unemployment rate dipped to 1.8% in 3Q2024 as employment accelerated from 15,000 in 2Q2024 to 26,700 in 3Q2024.
Labour productivity also improved, driving overall unit labour cost down to 0.9% in 3Q2024, as compared to 7.9% a year ago.
Moving forward, UOB’s Koh expects sustained growth momentum in trade-related sectors for the rest of 2024 and early 2025, supported by the ongoing upturn in the electronics cycle with tailwinds from front-loading of exports ahead of US president-elect Donald Trump’s proposed tariffs.
While he notes that the outlook remains “somewhat cloudy” for the rest of 2025 given the uncertainty, the downward trajectory of policy rates serves to offset any slowdown in investment and consumption activity abroad.
As such, the economist has downgraded his 2025 GDP growth forecast to 2.5% from 2.9% previously.
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DBS’s Chua recognises that the escalation of trade tensions among major economies are likely to increase under the Trump administration.
A significant escalation of the trade war could lead to a sharp global economic slowdown and considerable deceleration in Singapore’s economic growth that approaches the lower end of MTI’s growth forecast, he adds. Following this, Chua maintains his 2025 real GDP growth forecast at 2.8%.
For 2025, OCBC’s Ling maintains her 2.7% GDP growth forecast but remains cautious of the higher 2024 growth base and risks relating to the Trump administration.
