Economists’ 2024 forecast for Singapore rises to 2.6%, but output expectations fall: study

PRIVATE SECTOR economists’ median forecast for economic growth in 2024 as a whole rose to 2.6 per cent from 2.4 per cent previously, in the latest quarterly survey of professional forecasters released on Wednesday (September 11) by the Monetary Authority of Singapore (MAS).

However, the median growth forecast for 2025 remained unchanged at 2.5 percent.

Expectations for manufacturing sector growth in 2024 continued to decline, but this was more than offset by higher forecasts for most other sectors compared with the previous survey.

For full-year inflation, the median forecast for core inflation fell to 2.6% from 2.8% in the survey conducted in the previous quarter; for core inflation, it fell to 2.9% from 3%.

Economists predict that core and overall inflation will decline further in 2025, most likely to between 2 and 2.4 percent.

The latest expectations for 2024 remain in line with official forecasts. The government expects full-year gross domestic product (GDP) growth of between 2 and 3 percent. At its July meeting, the MAS lowered its full-year core inflation forecast to between 2 and 3 percent, but maintained its core inflation forecast range of 2.5 to 3.5 percent.

The latest survey was sent to 25 professional forecasters on August 13 and received 21 responses. The survey reflects their views, not those of MAS.

Sectoral differences

Compared with the June survey, economists’ forecasts for economic growth rose in three of the five main sectors: finance and insurance, construction, and wholesale and retail trade.

The financial sector is expected to record the highest growth at 5.7%, up from 5.1% in the previous survey.

Economists, meanwhile, had a weaker view of the manufacturing sector, as well as accommodation and food services, with the median forecast for the latter falling slightly to 2.9% from 3.1% in the previous survey.

Manufacturing is expected to post the smallest growth among sectors, at 0.6%, down from 1.6% in the last survey in June and 4% in the March survey.

In line with weaker expectations for the manufacturing sector, the country’s excluding oil export growth forecast worsened to 3% from 4% in June.

Still, the expected overall unemployment rate this year remained at 2.1 percent.

GDP is expected to grow 2.6% year-on-year in the third quarter of 2024, slightly below the 2.9% recorded in the second quarter. Core inflation in the third quarter is forecast to be 2.4% year-on-year, and core inflation is forecast to be 2.9%.

There are no changes in policy at the moment

Given the latest growth and inflation forecasts, most respondents expect monetary policy to remain unchanged at the upcoming October policy meeting – the last on the MAS’s quarterly meeting schedule this year. But more expect changes next year.

In the latest survey, 10.5% of respondents expect policy to ease in October by reducing the slope of the Singapore dollar nominal effective exchange rate (S$NEER), up from 6.3% in the June survey. Half of respondents foresee this move in January next year, while 35.3% foresee it in April 2025.

None of the respondents expect the S$NEER policy band to change in October, down from 6.3 per cent who expected a lower level in the previous survey. Only one respondent thinks such a move will happen in January, and none expect it to happen in April.

As in the previous survey, none of the respondents expect the S$NEER bandwidth to change in October – but one now expects the bandwidth to expand in January, compared with none in the survey conducted in June.

After five consecutive moves to tighten policy in 2021 and 2022, the MAS left its policy unchanged at three meetings in 2023 and 2024.

Focus on external growth

In terms of risks to economists’ current forecasts, the most frequently cited factor, both negatively and positively, has been external growth conditions.

An external slowdown in growth was cited as a downside risk by 73.3% of respondents, up 50% from the June survey, when China’s weaker growth was cited as a downside risk most often.

The most frequently mentioned biggest risk to the economy in September was also an external slowdown in economic growth – indicated by 40% of respondents in the latest survey.

Weaker growth in China has now been combined with the spillover effects of geopolitical tensions – the most frequently cited risk in June – as the second most frequently cited downside risk, cited by 66.7% of respondents.

The risk of tightening financial conditions was also pointed to by 26.7% of surveyed economists.

For growth risks, better-than-expected external growth was cited most often, up 73.3% from 64.3% in June. Some 40% of respondents saw this as the biggest growth risk.

Other key risk factors include stronger economic growth in China (up 66.7%) and a faster-than-expected recovery in the technology cycle (up 60%).