Yahoo Finance Analysts mostly keep Singapore’s GDP estimates for 2024 despite softer-than-estimated 4Q2023 growth
Analysts have kept their estimates to range between 2% to 3%, while BofA has upped its estimate to 2.6% from 2.3% previously.
Analysts are keeping their gross domestic product (GDP) estimates for 2024 unchanged after the Ministry of Trade and Industry (MTI) announced, on Feb 15, that real GDP grew by 1.1% in 2023 and by 2.2% in the 4Q2023.
While the figures stood lower than the 1.2% estimate for the full year and 2.8% for the final quarter of the year released on Jan 2, the full-year growth still marked the third straight year of expansions since the 3.9% y-o-y decline in 2020 from the Covid-19 pandemic.
The manufacturing sector reverted to positive growth of 1.4% y-o-y after contracting for the last four straight quarters. The growth was attributed to the electronics, transport engineering and chemical clusters.
The construction sector expanded to a further 5.2% y-o-y in the 4Q2023 from 3Q2023’s 3.7% amid healthy activities from the public and private sectors.
The services sector saw momentum dip slightly to 2.0% in 4Q2023 from 2.3% in 3Q2023.
OCBC keeps GDP growth forecast at 2%
Oversea-Chinese Banking Corporation’s chief economist and head of global markets research and strategy, Selena Ling, has kept her growth forecast at 2%, in the middle of MTI’s range of 1% to 3%.
“[This is] predicated on a global monetary policy easing cycle and stabilization in both the global semiconductor cycle and the Chinese economy,” says Ling, who notes that a global soft landing scenario has gained traction lately. The International Monetary Fund (IMF) recently upgraded its global GDP growth outlook to 3.1% from 2.9% previously. The US is expected to see GDP growth of 2.1% from 1.5% previously and China is tipped to grow at 4.6% in 2024 amid significant policy support.
On a sector basis, Ling is expecting the manufacturing sector to recover to around 2%. Construction is forecasted to remain “resilient” at close to 5% while the services sector is expected to grow by 2% to 3% y-o-y with the pickup in visitor arrivals offsetting the domestic belt-tightening as local job market conditions cool.
Ling is also forecasting for Singapore’s non-oil domestic exports (NODX) to recover to a 4% to 6% y-o-y growth in 2024, compared to the 13.1% y-o-y contraction seen in 2023.
“[This is] assuming stable global commodity prices and a cooling domestic labour market,” says Ling.
“The next policy milestone will be the Budget 2024 announcement due on Feb 16 which could herald a better-than-expected fiscal outturn at $3.1 billion surplus (0.4% of GDP) amid buoyant tax revenues, but pencil in a modest deficit of $1.7 billion (0.2% of GDP) amid an uncertain economic outlook, clouded by external headwinds including geopolitical tensions.”
“Budget 2024 will likely balance between mitigating cost of living and business costs, while implementing the Forward Singapore recommendations and preparing for a challenging future amid the transition to a digital/AI-enabled, sustainable and inclusive economy,” she adds.
RHB keeps GDP growth forecast at 2.5%
RHB Bank Singapore’s acting group chief economist Barnabas Gan has also kept his GDP growth estimate at 2.5% in 2024, although Singapore’s 4Q2023 GDP growth marginally stood below his expectations of a 2.3% y-o-y expansion.
“Based on our proprietary GDP leading index model, our forecasts for Singapore's GDP have materialised relatively well regarding how 4Q2023 GDP performed; our Singapore GDP-LEI (or leading economic indicator) pencilled 4Q2023 GDP growth at 2.3% YoY (against empirical 2.2%),” says Gan.
“The same model, which leads GDP by at least two quarters, suggests that Singapore GDP will expand by 3.0% in 1H2024. Based on six high-frequency indicators, the index has seen recovering signals in Singapore’s purchasing managers’ index (PMI), NODX, M2 money supply, and business expectations,” he adds.
In 2024, the economist expects Singapore to benefit from a “relatively rosier” global economic backdrop as well as from China’s anticipated economic recovery in 2024.
“Our global assumptions for this year are for overweight global equities, market-weight fixed income and underweight cash,” Gan writes.
“As of the end of 2023, US+Asean economic indicators continue showing signs of strength, especially in US labour, manufacturing and consumption numbers. Asean trade numbers are also improving, with export momentum significantly accelerating in China. Global equities have also rallied quarter-to-date, highlighting the improved investors’ risk appetite,” he adds. RHB has kept its forecasts for US and China’s GDP growth at 2.2% and 5.0% in 2024, above the consensus.
“We note that recent Chinese-centric data (specifically industrial production, retail sales, and fixed asset investments) suggest that overall GDP will likely accelerate into the year. China’s decision to cut its reserve requirement ratio, which will inject RMB1.0 trillion ($189.2 billion) of additional liquidity into its economy, should cushion the downside risks and allow consumption and investment patterns to fuel its growth in the quarters ahead,” he writes.
In the next six to 12 months, Gan is remaining positive on the electronics, transport engineering, and general manufacturing industries.
“Our view for a bottoming global semiconductor demand continues to materialise year-to-date; global semiconductor sales have recovered strongly into 2024, whilst electrical and electronics (E&E) exports in key Asian economies are mostly up (albeit seeing a decline in December due to year-end effects). Singapore’s electronic cluster remains the backbone of its economic structure; electronics commands 40% weights in the industrial production basket, accounting for 22.3% of total NODX in 2019 – 2023,” he says.
DBS maintains growth forecast at 2.2%
DBS Group Research economist Chua Han Teng is keeping his GDP growth forecast at 2.2%, as he expects the external-led sectors to support Singapore’s recovery.
That said, he sees that the improvement will be “fragile” on the back of global economic uncertainties such as high interest rates from advanced economies, the “bumpy” conditions in China and lingering geopolitical risks that could disrupt supply chains.
“The MTI maintained its 2024 growth forecast range at 1.0% to 3.0% but reiterated significant downside risks,” he points out.
In its Feb 15 statement, the MTI warned that an escalation of the Israel-Hamas conflict or the war in Ukraine could disrupt global supply chains and commodity markets, which would weigh on global trade and growth.
The lagged effects of monetary tightening could also trigger latent vulnerabilities in banking and financial systems, leading to stresses on regional economies.
Finally, idiosyncratic cost shocks such as adverse weather events could also disrupt the global disinflation process.
On a sector basis, Chua is expecting a recovery in the manufacturing sector, which is turning around from the doldrums seen in 2023. Singapore’s electronics output is also expected to benefit from the positive spillover from improvements in global semiconductor sales.
Services growth is also expected to hold up in 2024, mainly supported by external-facing services clusters. Financial growth is likely to be sustained, while information and communications services should continue to benefit from digitalisation efforts and demand. Trade-related services should benefit from the recovery in global trade volumes and demand alongside the uptick in the manufacturing sector.
For Budget 2024, Chua believes that the focus will be on adapting to challenges and seizing opportunities to build a better Singapore in an uncertain world.
“We expect a slightly expansionary fiscal stance in FY2024, with an overall fiscal deficit of $3.0 billion (0.4% of GDP). More measures and allowances to tide through high costs, job disruption, and retirement are likely. The priority will also be lifting capabilities by upskilling, riding emerging trends, and remaining attractive,” he writes.
BofA lifts GDP estimate to 2.6%
Bank of America’s (BofA) economist Ang Kai Wei has upped his GDP forecast for 2024 to 2.6% from 2.3% previously, the only one to do so.
While the downward revision stood lower than the estimates of the consensus, Ang noted that it was still firmer than the Monetary Authority of Singapore’s (MAS) expectations from October 2023.
“Our upward revision mainly reflects the higher starting point in GDP level terms vs. few months ago. Our forecast assumes GDP averaging 0.2-0.4% q-o-q seasonally adjusted in 1H2024 and approaching trend pace (0.8% q-o-q seasonally adjusted) in 2H2024 as global growth recovery advances. Full year 2024 GDP would exceed 3% if trend-pace sequential growth is maintained in 1H2024,” says Ang.
Ahead of the MAS’s April meeting, Ang expects the central bank to keep its policy settings if its baseline expectations for core inflation moderate in 2025.
“[The] focus is squarely on inflation risks, given the general improvement in growth outlook. However, given MAS's pre-emptive stance and with effects of past policy tightening fading, the April meeting could well be ‘live’, with [the] risk of a 50-basis point (bps) slope steepening if core inflation is seen stickier for longer. For Budget 2024 tomorrow (Feb 16), we keep a close eye on [the] Ministry of Finance’s (MOF) projection of fiscal impulse and output gap estimates, and potential inflationary (or disinflationary) impact from Budget measures,” he says.
Citi keeps GDP forecast at 3%
Citi Research analyst Kit Wei Zheng has kept his GDP forecast at 3%, with sequential growth likely to come in stronger in 2H2024. Kit’s forecast is the most upbeat among the houses here.
“For now, the implied narrowing of the output gap in 2H2024, moderation in wage growth & unit labour costs, and our expected rise in core inflation in January to February 2024 are broadly consistent with MAS’s January monetary policy statements (MPS) expectations,” he writes.
“Either way, balance of risks likely implies a preference for a strong (or stronger) Singapore dollar nominal effective exchange rate (S$NEER) within the band. With core still seen above historical averages in the near term, a likely focus on cost of living in Budget 2024 amidst a small expansionary fiscal impulse, monetary policy settings may need to remain appropriately restrictive, and further upside surprises may continue to impute hawkish risks to April or beyond,” he adds.
Kit expects Singapore’s core inflation to rise to 3.4% in January and peak at 3.6% in February before falling to 3.4% in March.
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