The global soft-landing has set up a stable backdrop for Singapore’s small open economy. While global GDP is set to moderate due to declining growth in the US, a recession will likely be avoided. A stable contribution from China is equally important, with a soft rebound and GDP growth of +4.5% expected in 2024.
Global soft-landing a stable backdrop for Singapore
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The strength of ASEAN growth in 2024 is another key source of support to Singapore. As Singapore’s largest trading partner, we expect a positive spill-over effect on Singapore’s exports and/or demand from the 50bps pick-up in the annual real GDP growth of ASEAN-5 economies. This will be driven by the electronics export cycle bottoming and continued recovery in travel and tourism; both sectors being key to Singapore’s growth and recovery.
More balanced growth for Singapore
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the gradual recovery of external demand and global electronics industry.
Firms within the transport engineering cluster have the most optimistic outlook for the next six months, with more aircraft engine repair jobs in aerospace (ST Engineering (SGX:S63), SIA Engineering (SGX:S59)) and higher level of shipyard activities in marine and offshore segments (Seatrium (SGX:S51)). Electronics PMI returned to expansion (50.1) in Nov 23, affirming a recovery for the technology sector, corroborating the improvements in business sentiments over the past two quarters (Q323: +23 vs Q1/Q2: +7/+11).
The services sector has held the fort over the past year on reopening tailwinds. We expect this situation to continue amid the anticipated Chinese tourists influx into Singapore-Malaysia-Thailand with the waiver of visa requirements for short-term visits. Albeit positive, a repeat of double-digit growth in the travel-related services is less likely as international visitor arrivals head towards the final leg of complete recovery in 2024.
Conversely, the wholesale trade and finance & insurance sectors should recover after signs of bottoming out from 3Q23. The expectation for a pickup in financial activities should spell for strong non-interest income (NII) growth for banks, which would help alleviate the impact of stabilising/declining net interest income.
FDI inflow
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Above is an excerpt from a report by DBS Group Research. Clients of DBS may access the full PDF report @ https://www.dbs.com/insightsdirect/.
