Singapore Merlion

SINGAPORE: Singapore’s economic growth to soar in the next two years, fuelled by a surge in exports, while inflation slows, said the Asian Development Bank (ADB) on April 11.

The Straits Times reports, ADB, headquartered in Manila, predicts that Singapore’s gross domestic product (GDP) will expand by 2.4% in 2024, a significant leap from the 1.1% growth recorded in the previous year.

The Ministry of Trade and Industry (MTI) of Singapore has been eyeing a GDP growth rate between 1% and 3% for 2024. Meanwhile, the International Monetary Fund (IMF) has pegged its forecast slightly lower at 2.1%.

MTI released its advance GDP estimates for the first quarter of 2024 on April 12, along with the Monetary Authority of Singapore (MAS) sharing its quarterly statement on the Singapore-dollar policy stance.

ADB’s optimistic outlook hinges on the expectation of a gradual uptick in manufacturing, buoyed by the revival of global electronics demand. Although domestic and tourism-related activities are poised to cool down as demand normalises, the construction sector is expected to continue thriving thanks to contracts awarded in 2023.

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Looking further ahead, ADB foresees the growth momentum extending into 2025, with GDP growth projected to accelerate to 2.6%.

Mr Albert Park, ADB’s chief economist, highlighted Singapore’s position among export-led economies poised to benefit from the rising global demand, particularly for technology exports like semiconductors.

He said, “The end of interest rate hiking cycles in most economies as well as continued recovery in goods exports from an upturn in the semiconductor cycle will support growth.”

On the inflation front, ADB anticipates a moderation to 3% in 2024 and further easing to 2.2% in 2025.

Contributing factors include a surplus in housing units leading to lower accommodation costs, decreased private transport expenses amid falling oil prices, and stabilising food and service prices. Additionally, the strengthening nominal effective exchange rate of the Singapore dollar is expected to keep imported inflation in check.

MAS shares a similar outlook, expecting both headline and core inflation to hover between 2.5% and 3.5% in 2024.

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Dr John Beirne, principal economist at ADB, notes this trend aligns with broader patterns across Southeast Asia, where inflation is expected to drop to 3.2% in 2024 from 4.1% in the preceding year.

Looking ahead to 2025, Singapore’s inflation is forecasted to dip further to 2.2%, with the pace of price increases in Southeast Asia slowing to 3%. However, ADB sounds a note of caution, highlighting downside risks to the outlook.

Potential obstacles include a delay in the US Federal Reserve’s anticipated interest rate cuts, which could dampen global demand and investment flows, crucial drivers of growth in Asia. Additionally, spillover effects from economic slowdowns in China could adversely affect growth prospects in the region. Moreover, geopolitical tensions and adverse weather events pose additional challenges.

According to ADB, “Several factors could keep rice prices high in 2024.”

The ongoing conflict in the Middle East has already disrupted shipping routes, while weather patterns like El Nino threaten to exacerbate supply chain disruptions, particularly in key commodities like rice. /TISG

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