Singapore’s GDP growth forecast revised upward for 2024, outlook mixed for 2025

SINGAPORE: The Ministry of Trade and Industry (MTI) announced on 22 November 2024 that Singapore’s GDP is projected to grow by approximately 3.5% for 2024, up from an earlier forecast of 2.0 to 3.0%.

However, growth is expected to moderate to between 1.0% and 3.0% in 2025, reflecting global economic uncertainties.

In the third quarter of 2024, Singapore’s economy expanded by 5.4% year-on-year, a significant acceleration from the 3.0% growth in the previous quarter.

On a quarter-on-quarter seasonally adjusted basis, the economy grew by 3.2%, building on a 0.5% expansion in the second quarter. This robust performance brought average year-on-year growth for the first three quarters to 3.8%.

Growth in Q3 2024 was largely driven by strong performances in the manufacturing, wholesale trade, and finance & insurance sectors, boosted by an upturn in the global electronics cycle. In contrast, consumer-facing sectors such as retail trade and food & beverage services continued to struggle, hindered by strong outbound travel by locals and sluggish international visitor arrivals (IVA).

Economic outlook for 2024

Global trends influenced the revised 2024 GDP forecast. The US, Eurozone, and some regional economies such as Malaysia exceeded expectations in Q3 2024 due to stronger consumption growth, while China’s growth continued to decelerate in line with predictions.

For the remainder of 2024, external demand for Singapore is expected to stay resilient, supported by recovering global electronics demand. Growth in manufacturing and outward-oriented services, such as wholesale trade, is anticipated. Conversely, tourism-related and consumer-facing sectors face challenges due to weaker-than-expected IVA recovery and subdued tourist spending.

Economic outlook for 2025

The forecast for 2025 indicates slower growth amid increased global uncertainties. Major trading partners, including the US and China, are expected to see moderated expansion. Risks such as escalating geopolitical tensions, higher oil prices, and monetary policy divergences could weigh on global trade and investment.

Domestically, growth in Singapore’s manufacturing and trade-related services is expected to remain positive.

The electronics sector, bolstered by demand for semiconductor chips for PCs and AI-capable devices, is set to drive manufacturing growth, with spillover benefits for precision engineering and wholesale trade.

Outward-oriented services like information & communications and finance & insurance are projected to see steady expansion.

However, sectors such as retail trade and food & beverage services are likely to continue underperforming due to persistent outbound travel trends and limited recovery in IVA.

Sectoral performance in Q3 2024

Several key sectors exhibited mixed results in Q3 2024:

• Manufacturing: Expanded by 11.0% year-on-year, reversing a Q2 contraction. Growth was driven by strong demand for electronics.
• Construction: Grew by 3.7% year-on-year, supported by public sector construction despite weaker private sector output.
• Retail trade: Contracted by 0.7% year-on-year, weighed down by lower non-motor vehicle sales.
• Finance & insurance: Expanded by 5.4% year-on-year, driven by higher net fee incomes in trading and fund management activities.
• Transportation & storage: Achieved 7.5% year-on-year growth, supported by increased air and sea transport activity.

While Singapore’s economic growth is projected to close 2024 on a stronger note than initially expected, the outlook for 2025 highlights lingering uncertainties. Diverging sectoral performances and global risks underline the challenges ahead for sustaining broad-based growth.