PM Lee in his annual New Year Message on Dec 31 said that the economy is expected to grow by 1 per cent to 3 per cent in 2024. - ST PHOTO: ONG WEE JIN
SINGAPORE: Economists are looking at 2024 with more optimism after Singapore’s economy grew faster than expected in the final quarter of 2023, with the manufacturing sector finally returning to growth.
The economy expanded 2.8 per cent year on year in the three months to December, compared with 1 per cent in the previous quarter, and far exceeding the 1.8 per cent growth tipped by analysts in a Bloomberg poll.
For the whole of 2023, the economy grew 1.2 per cent, moderating from the 3.6 per cent growth in 2022, according to advance estimates from the Ministry of Trade and Industry (MTI) on Jan 2.
Still, 2023 growth came in a touch above the 1 per cent expansion projected in a quarterly survey of professional forecasters released by the Monetary Authority of Singapore (MAS) on Dec 13.
On a quarter-on-quarter seasonally adjusted basis, the economy expanded by 1.7 per cent in the fourth quarter, extending the 1.3 per cent expansion in the third quarter.
The Government’s growth forecast remains unchanged from November’s outlook. Prime Minister Lee Hsien Loong in his annual New Year message on Dec 31 reiterated that the economy is expected to grow by 1 per cent to 3 per cent in 2024, “but much will depend on the external environment”.
Maybank economist Chua Hak Bin said Singapore’s econom
He estimates that 2024 growth will come in at 2.2 per cent, on the higher side of MTI’s 1 per cent to 3 per cent forecast range.
“Green shoots are sprouting in exports and manufacturing, brightening the outlook for 2024. Global electronics demand is recovering, driven by a replacement cycle with new models and upgrades; depleting United States inventories; generous US subsidies on semiconductors and electric vehicles; and an artificial intelligence boom,” Dr Chua said.
RHB acting group chief economist Barnabas Gan kept 2024 growth at 3 per cent, on the back of positivity on the electronics, precision engineering, transport engineering and general manufacturing industries.
He noted that China’s potential economic recovery in 2024 may also fuel tourism demand in the region.
OCBC chief economist Selena Ling was less sanguine, maintaining her 2024 forecast at 2 per cent.
She noted that the external environment can be expected to be less favourable to Singapore’s security and prosperity, while geopolitical uncertainties will continue weighing on the global economy.
These include the ongoing competition between the US and China in advanced manufacturing, upcoming Taiwan and US elections, whether the US will escape a recession, and if and when the US Federal Reserve will start to cut interest rates.
“On the domestic front, do keep an eye on the upcoming 2024 Budget due on Feb 16, where additional cost-of-living assistance may be forthcoming for the lower-income and more vulnerable workers and households, especially since 2024 is now flagged as a leadership transition year,” Ms Ling said.
DBS economist Chua Han Teng maintained his 2024 forecast at 2.2 per cent, saying “the recovery from 2023 will be mainly external-led, but is likely fragile, given lingering global uncertainties”.
In the fourth quarter of 2023, the manufacturing sector grew 3.2 per cent year on year, after contracting in the first three quarters of 2022.
The growth was led by output expansions across all clusters, with the exception of the precision engineering industry.
On a quarter-on-quarter seasonally adjusted basis, the manufacturing sector grew 9 per cent in the fourth quarter, accelerating from the 0.3 per cent expansion in the third quarter.
The construction sector expanded by 9.1 per cent year on year, faster than the 6.2 per cent growth in the previous quarter.
On a quarter-on-quarter seasonally adjusted basis, the pace of growth in the construction sector improved to 4.3 per cent, from 0.8 per cent in the third quarter.
All sectors within the services category recorded expansions in the fourth quarter.
The wholesale and retail trade and transportation and storage sectors grew 1.5 per cent year on year, extending the 1.3 per cent expansion in the previous quarter.
The growth was led by wholesale and retail trade activities, as well as a buzzing air transport segment, which saw continued recovery in air passengers handled at Changi Airport.
However, these sectors collectively shrank by 1.4 per cent on a quarter-on-quarter seasonally adjusted basis.
The information and communications, finance and insurance and professional services sectors grew 3.9 per cent from a year ago in the fourth quarter, extending the 2.5 per cent expansion in the preceding quarter.
On a quarter-on-quarter seasonally adjusted basis, the group collectively expanded 2.5 per cent, faster than the 1.6 per cent growth in the third quarter.
The accommodation and food services, real estate, administrative and support services and other services sector grew 2 per cent year on year, down from its 3.9 per cent growth in the previous quarter.
On a quarter-on-quarter seasonally adjusted basis, the industries in the group shrank by 0.7 per cent in the fourth quarter, a reversal of the 0.7 per cent expansion in the third quarter. - The Straits Times/Asia News Network
