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The Ministry of Trade and Industry (MTI) has updated Singapore’s GDP growth forecast for 2024, reflecting a more positive outlook driven by robust performance in key technology sectors. The adjustment of “2.0% to 3.0%”, is a fine-tuning from the earlier “1.0% to 3.0%” prediction. This revision reflects a more optimistic outlook following a robust second quarter of 2024.
In Q2 2024, Singapore’s economy grew by 2.9 % year-on-year, building on the previous quarter’s 3.0 % growth. Quarter-on-quarter, the economy expanded by 0.4%, maintaining the same pace as Q1. The first half of 2024 saw a solid average GDP growth of 3.0 % year-on-year.
Key sectors driving growth in Singapore’s economy included wholesale trade, finance & insurance, and information & communications, each demonstrating significant contributions to the overall expansion. The wholesale trade sector experienced notable growth, buoyed by increased activity in machinery, equipment, and supplies, particularly in the electronics components segment.
Similarly, the finance & insurance sector continued to thrive, benefiting from a robust performance in banking and fund management, as well as a surge in net commissions amidst global interest rate cuts.
The information & communications sector also played a pivotal role in the economic upturn, with substantial advances in the IT & information services segment. This growth was driven by a surge in activities related to software development and online marketplaces, reflecting the expanding role of digital technologies in the economy.
A standout development was the remarkable boost in the electronics cluster, fueled by robust demand for AI-related chips. This sector’s recovery was marked by strong performance in the production of chips for smartphones and PCs, which counterbalanced the ongoing weakness in demand for automotive and industrial chips. This positive trend highlights the growing importance of AI and digital technologies in driving economic momentum.
Looking ahead, MTI anticipates a steady external demand outlook, bolstered by expected improvements in global economic conditions. The US is projected to see a gradual easing in GDP growth due to slower consumption and a cooling labour market, although AI investments may sustain some growth momentum. The Eurozone is expected to experience gradual improvement, driven by a recovery in consumer spending. Japan’s growth is forecasted to rise with better private consumption and easing inflation.
In Asia, China’s economy may slow slightly in the latter half of the year due to tapering investment growth and overcapacity issues, though a stabilising property market could spur consumer sentiment and consumption. Southeast Asian economies are also expected to show a modest recovery, supported by improved global electronics and tourism demand.
Despite these positive projections, risks remain, including potential geopolitical and trade conflicts that could impact business sentiment and global trade. Additionally, any disruptions to global disinflation could tighten financial conditions and trigger market volatility.
The manufacturing sector, particularly electronics, is expected to recover more robustly in the second half of 2024, driven by ongoing demand for advanced chips. This recovery is anticipated to positively affect related trade services and the finance & insurance sector. Conversely, the biomedical manufacturing sector may continue to face challenges due to persistent weak pharmaceutical output.
Earlier, Mr Chia Der Jiun, Managing Director, MAS, at the MAS Annual Report 2023/2024 Media Conference noted that Financial institutions are increasingly adopting AI, with a focus on backend functions and the growth of Generative AI. The Monetary Authority of Singapore (MAS) is driving AI advancements through talent development, ethical governance, and AI Centres of Excellence. Meanwhile, MAS is investing up to S$100 million in quantum technology projects, aiming to boost the financial sector’s value and security by 2035, including efforts in quantum algorithms and secure communication.
While the revised forecast reflects cautious optimism, MTI emphasises the need for vigilance regarding global economic uncertainties and potential impacts on Singapore’s economic trajectory.
