SINGAPORE: Singapore’s economy gained momentum in the third quarter of 2024, growing by 4.1 % year-on-year, according to advance estimates from the Ministry of Trade and Industry (MTI) released on 14 October.

This represents a significant increase from the 2.9 % growth recorded in the second quarter.

In Q2 2024, the economy expanded by 2.9% year-on-year, slightly lower than the 3.0% growth seen in Q1.

Separately, Singapore’s central bank The Monetary Authority of Singapore (MAS) announced on the same day that  it will maintain its current monetary policy settings, as inflation shows signs of easing and economic growth continues to strengthen.

The recovery was attributed to the manufacturing sector, which expanded by 7.5 per cent in Q3, a notable rebound following contractions in the previous two quarters.

Other sectors, such as construction and finance, also saw positive contributions to the economy.

On a quarter-on-quarter seasonally adjusted basis, the economy grew by 2.1 per cent, up from 0.4 per cent in Q2 2024.

Advance gross domestic product (GDP) estimates are based on data from the first two months of the quarter, serving as an early indication of Singapore’s economic performance.

These estimates may be revised as more comprehensive data becomes available later in the year.

In August, Singapore had adjusted its GDP growth forecast for 2024 to a range of 2 per cent to 3 per cent, following stronger-than-expected economic performance in the first half of the year.

Previously, the MTI had projected GDP growth between 1 per cent and 3 per cent.

Manufacturing drives recovery

The manufacturing sector led Singapore’s recovery in Q3, growing by 7.5 per cent year-on-year.

This marked a turnaround from the 1.1 per cent contraction in Q2 and the 1.5 per cent decline in Q1. MTI reported that growth was broad-based across all manufacturing clusters except for the biomedical manufacturing cluster.

On a quarter-on-quarter basis, manufacturing grew by 9.9 per cent, a sharp improvement from the 1.2 per cent contraction in Q2. The continued expansion in manufacturing is expected to remain a key driver for overall economic growth.

The construction sector grew by 3.1 per cent in Q3 2024, although this was slower than the 4.8 per cent growth recorded in Q2. This sector’s growth was mainly attributed to an increase in public sector construction output.

On a quarter-on-quarter basis, however, construction growth was flat, moderating from the 3.4 per cent expansion seen in the previous quarter.

Mixed performance in other sectors

The group of sectors comprising wholesale and retail trade, transportation, and storage collectively grew by 3.5 per cent in Q3, slightly lower than the 3.9 per cent expansion in Q2.

Growth within this group was mainly supported by the transportation and storage sectors, with water and air transport performing particularly well.

Wholesale trade also expanded, led by the machinery, equipment, and supplies segment. However, the retail trade sector continued to face challenges, contributing to a more subdued performance.

Meanwhile, the group of sectors including information and communications, finance and insurance, and professional services posted a 4.3 per cent year-on-year growth in Q3, down from 5.3 per cent in Q2.

In the information and communications sector, IT and information services led growth, while the professional services sector benefited from an expansion in activities related to head offices and business representative offices.

The finance and insurance sector saw broad-based growth, particularly in banking and financial services.

On a quarter-on-quarter seasonally adjusted basis, these sectors grew by 1.6 per cent, an improvement over the 1.2 per cent growth in Q2.

Accommodation and food services show steady growth

Sectors related to accommodation, food services, real estate, and administrative support services grew by 1 per cent year-on-year in Q3, maintaining the same pace as the previous quarter.

MTI attributed growth within this group to the accommodation sector, which benefitted from a recovery in international visitor arrivals.

On a quarter-on-quarter basis, these sectors collectively expanded by 0.8 per cent, reversing the 1.3 per cent contraction seen in Q2.

The preliminary GDP estimates for Q3 2024, which will include further details on inflation, employment, and productivity, will be released as part of the Economic Survey of Singapore next month.

The broader economic outlook for Singapore in 2024 remains positive, with growth being driven by key sectors like manufacturing and finance.

However, challenges persist in areas such as retail trade, which may face headwinds in the coming months.

SINGAPORE: The Monetary Authority of Singapore (MAS) announced on 14 October that it will maintain its current monetary policy settings, as inflation shows signs of easing and economic growth continues to strengthen.

According to the central bank’s assessment, core inflation, which excludes accommodation and private transport costs, has already moderated and is expected to decline further, potentially reaching around 2 per cent by the end of 2024.

In its monetary policy statement, MAS indicated that Singapore’s economy is on track for steady expansion.

“Barring a weakening in global final demand, the economy should continue to expand at a steady pace and keep close to its potential path in 2025,” the central bank noted.

This announcement marked the sixth consecutive time MAS opted to leave its policy unchanged.

MAS stated that the current monetary policy remains consistent with its long-term goal of price stability.

Specifically, the central bank will maintain the current rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band.

No changes were made to the band’s width or the level at which it is centred.

Unlike many other countries, Singapore’s monetary policy is focused on managing the exchange rate rather than interest rates.

The MAS uses the S$NEER policy band, allowing the Singapore dollar to fluctuate against the currencies of key trading partners.

The parameters of this band, including its slope, mid-point, and width, are adjusted as necessary to maintain economic stability, although the exact band levels are not disclosed to the public.

This latest decision follows the MAS’s last tightening of monetary policy in October 2022, when it re-centred the mid-point of its exchange rate band.

MAS’s inflation forecasts reflect an improving outlook, with headline inflation expected to come in at around 2.5 per cent this year, significantly down from the 4.8 per cent recorded in 2023.

The central bank projects that inflation will ease further to between 1.5 and 2.5 per cent by 2025.

Accommodation inflation is expected to slow as leasing demand decreases, while private transport inflation is anticipated to rise due to strong demand for cars.

Core inflation, which is closely watched by MAS, is expected to average within the 1.5 to 2.5 per cent range in 2025, driven by moderate underlying cost pressures.

The central bank highlighted several factors contributing to the easing inflationary pressures, including stable imported costs, resulting from improved global oil production and favourable weather conditions for food supplies.

Domestic labour costs are expected to rise more gradually as wage growth moderates and productivity improves.

However, MAS warned that if economic growth drives higher-than-anticipated demand for labour, it could take longer for wage and service price inflation to stabilise.

According to MTI’s Advance Estimates, the Singapore economy expanded by 2.1% on a quarter-on-quarter seasonally-adjusted basis in Q3, accelerating from the average of 0.4% in the first half of the year.

On the broader economic front, Singapore’s growth momentum has exceeded expectations.

Preliminary estimates indicate that the economy expanded by 4.1 per cent year-on-year in the third quarter of 2024, following a 2.9 per cent increase in the previous quarter.

The electronics industry has been a significant driver of this growth, alongside stronger output in the modern services sector.

MAS expressed optimism about the economy’s prospects for the rest of 2024, citing the ongoing upturn in the electronics and trade cycles, as well as easing global financial conditions.

The central bank now expects GDP growth to reach the upper end of its forecast range of 2 to 3 per cent for the full year.

Nevertheless, MAS cautioned that significant uncertainties remain in the global outlook.

A sharp escalation in geopolitical tensions or trade conflicts could disrupt global and domestic investment and trade.

Additionally, there is uncertainty surrounding the pace and impact of global macroeconomic policy easing, as well as the sustainability of the recovery in the electronics sector.