- 3Q24 real GDP growth was significantly better than advance estimates at 3.2% QoQ sa and 5.4% YoY.
- Corporate profits have also recovered in 2024 amid improved external conditions.
- Economic growth will be solid in 2024, and we expect a dynamic outlook for 2025.
- Nonetheless, we are watchful of downside risks, especially from a wider trade war under Trump 2.0.
- We raise our 2024 real GDP growth forecast to 3.8% and maintain our projection at 2.8% for 2025.
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Singapore’s economy strengthened in 3Q24, with the recovery for full-year 2024 likely to be solid compared to the weakness in 2023. November 22’s numbers were significantly better than earlier advance estimates, reflecting broad-based upward revisions across the manufacturing, construction, and services sectors. Real GDP growth rose to 3.2% quarter-on-quarter seasonally adjusted (QoQ sa) in 3Q24, marking the fastest sequential expansion since 1Q21. Economic growth therefore picked up to 5.4% year-on-year (YoY) in 3Q24, the highest since late 2021. Advance GDP growth for 3Q24 was 2.1% QoQ sa and 4.1% YoY.
We raise our 2024 real GDP growth forecast to 3.8%, and maintain our 2025 prediction at 2.8%, broadly in line with the updated projections by the Ministry of Trade and Industry (MTI). Alongside the GDP numbers, the MTI upgraded its 2024 growth forecast to around 3.5% from 2.0-3.0% previously. It also introduced a 2025 growth forecast range of 1.0-3.0%, implying a mid-point of 2.0%.
Still-resilient external demand outlook
Singapore’s external-oriented sectors (manufacturing, trade-related services, and modern services) performed better in the first three quarters of 2024 relative to 2023. Our baseline view is for steady expansion in these external-oriented sectors over the coming quarters amid resilient external demand, even as risks are tilted to the downside.
Global economic growth is likely to remain stable in 2025. We expect major economies like the US to exhibit robust but slightly cooler GDP growth, with support from improved growth prospects in the Eurozone and stable growth in China (see ‘Defying the trend: Economic Outlook and Market Strategy for 2025’). This backdrop is underpinned by the ongoing global tech and electronics upcycle and the gradual reduction of global interest rates. We expect these positive global drivers to spill over positively to Singapore’s trade-related (manufacturing, wholesale trade, transport & storage) and modern services (finance & insurance and information & communications) sectors. Our expectations look broadly in line with MTI’s assessment for the rest of 2024 and 2025.
Downside risks and cues from Trump 1.0
Singapore businesses also face a volatile global economic environment with elevated downside risks. The MTI release highlighted increased global economic uncertainties in 2025, ‘including uncertainty over the policies of the incoming US administration’. It also mentioned two key downside risks: 1) a further escalation of geopolitical conflicts, including in the Middle East, and trade tensions among major economies; and 2) tighter financial conditions from disruptions to the global disinflation process.
Regarding the escalation of trade tensions among major economies, these look likely to increase under Trump 2.0, with his election campaign promises of a wider trade war. These include potentially imposing 60% tariffs on all goods imported from China into the US, or/and blanket tariffs of 10% to 20% on all imports. However, the eventual global economic impact would depend on the sequence of the rollout of the new administration’s policies.
Trump’s first US presidency from 2017 to 2021 offers some cues on the potential downside risks for Singapore’s economy in a global downturn. During Trump 1.0, Singapore’s real GDP growth slowed to below 2.0% YoY from 4Q18 before bottoming out at 0.8% YoY in 3Q19, prior to the COVID-19 pandemic crisis in 2020. While a technical recession was avoided, sequential QoQ sa growth was weak in 2H19, averaging at just 0.1% in 2H19 compared to 0.6% in 1H19.
In 2018, Singapore’s economic growth drivers already started to shift. The island-nation’s manufacturing expansion cooled due to the maturing global electronics and manufacturing cycle, while trade-related services growth remained firm. In 2019, the negative effects from increased tariffs and heightened policy uncertainty resulted in a global economic slowdown and a contraction in Singapore’s manufacturing and trade-related services sectors in 2H19. A significant escalation of the trade war under Trump 2.0 could lead to a sharp global economic slowdown, and possibly a considerable deceleration in Singapore’s economic growth that approaches the lower end of MTI’s growth forecast, implying muted QoQ sa average rate over several quarters.
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